Rent where you can buy?

[LivingAlmostLarge]

Rent right now is substantially cheaper than owning. Right now you can afford to rent somewhere you can't afford to buy. So should you rent in neighborhoods you can't afford to buy? By the same token do you live in a nicer neighborhood or less nice neighborhood when you buy? Do you stretch or maybe just comfortably afford? And if you stretch do you stretch for nicer or average?

I think comfortably afford. I feel like anywhere you live you should be able to fit in and afford everything everyone else has. That even renting you should be able to know you are able to buy where you rent even if renting is substantially cheaper you should be testing out where you think you would want to live.

[bjl584]

Rents where I live have followed housing prices over the past few years.
A lot of people are being pushed out of their neighborhoods once leases are up and are renewed.

So, a blanket statement of renting is cheaper than buying doesn't apply to everywhere.
It really depends where you are.
The work from home revolution has taken geographic restrictions off the table.
All one needs is an internet connection.

I do think that the age old advice of only buying when you can afford it still applies.
Rent until you have a 20% down payment and can take on a mortgage that doesn't eat up more than 25% or so of monthly take home pay.

[ua_guy]

Rent followed housing prices here too. Up, up, and away. Around big cities rents often follow the commute distance to large employers and centers of business, no different here. The sprawl of bedroom communities in the upper left is absolutely insane as people keep trying to rent and buy farther out where prices are cheaper.

[disneysteve]

Rent right now is substantially cheaper than owning.

That might be true if the property owner has owned the place for a long time and the tenant has lived there for a long time as landlords tend to not make huge hikes on existing renters. If, however, the owner bought the place recently, the rent needs to reflect the owner's costs. Or if you are renting anew, the owner is likely going to charge current market rates regardless of how long they've owned the place. When someone moves out, that's their opportunity to get up to current rates.

[disneysteve]

As for your question, you should live where you can afford to live. Follow the guidelines and you'll stay out of trouble. And don't give a rat's a** about what other people can afford. If you worry about keeping up with the neighbors, who are probably buried in debt, you'll be right there with them. Live your life. Live below your means. Let them live their lives.

[Scallywag]

Rent right now is substantially cheaper than owning. Right now you can afford to rent somewhere you can't afford to buy. So should you rent in neighborhoods you can't afford to buy? By the same token do you live in a nicer neighborhood or less nice neighborhood when you buy? Do you stretch or maybe just comfortably afford? And if you stretch do you stretch for nicer or average?

I think comfortably afford. I feel like anywhere you live you should be able to fit in and afford everything everyone else has. That even renting you should be able to know you are able to buy where you rent even if renting is substantially cheaper you should be testing out where you think you would want to live.

Where is this mythical place where rent is cheaper than PITIM? Where I live, rent was always the same as PITIM & has shot up with the boom in home prices.

I am so glad we have state wide rent control now but even so, landlords can raise a minimum of 5% each year. Who gets a 5% raise year over year? Or what mortgage payment goes up by 5% each year?

We're renting only because we can't make an all cash offer 30% over asking in this crazy housing market currently. The day we can, we'll be home owners.

Until then or until we move out of the madness we call "our neck of the woods", we'll be renting knowing we could have afforded the PITIM over the long haul in our areas if it hadn't been for the crazy bidding / cash price offers we're seeing here.

[jenn_jenn]

I only follow the market where we’ve rented out our vacation condo and rents have definitely followed home prices.

We purchased the condo for 20% down in March 2021 and I easily rent it out for $500 more than our mortgage monthly. (Granted I rent it out fully furnished + short term leases which command a premium but I was shocked at how many people asked if I’d be willing to lease it for that amount unfurnished for a year lease.)

So YMMV I guess? Renting is not cheaper in SoCal.

[jenn_jenn]

As for your question, you should live where you can afford to live. Follow the guidelines and you'll stay out of trouble. And don't give a rat's a** about what other people can afford. If you worry about keeping up with the neighbors, who are probably buried in debt, you'll be right there with them. Live your life. Live below your means. Let them live their lives.

THIS x1000.

[scfr]

I'm not exactly sure what you're asking, but I personally prefer to rent substantially less than what I buy when it comes to housing. With ownership, I have stored value. With renting, I do not. For me, that matters. So yes, when I buy I live in a slightly nicer neighborhood and a much nicer property.

Also, where we live, house and rent prices have not been moving in tandem step.

[LivingAlmostLarge]

Where is this mythical place where rent is cheaper than PITIM? Where I live, rent was always the same as PITIM & has shot up with the boom in home prices.

I am so glad we have state wide rent control now but even so, landlords can raise a minimum of 5% each year. Who gets a 5% raise year over year? Or what mortgage payment goes up by 5% each year?

We're renting only because we can't make an all cash offer 30% over asking in this crazy housing market currently. The day we can, we'll be home owners.

Until then or until we move out of the madness we call "our neck of the woods", we'll be renting knowing we could have afforded the PITIM over the long haul in our areas if it hadn't been for the crazy bidding / cash price offers we're seeing here.

Pretty much everywhere. Compare apples to apples. Right now to buy my place say $2M. Rent for comparable home around $4k/month. Huge difference. DH's cousin just bought house for $900k. Mortgage PITI is $5k/month. Rent? $3000/month same neighborhood. For sure in California is there a large discrepancy in renting and owning. It's so expensive to own in most places in Cali and the rent is dirt cheap.

Now you talk about buying years ago? Meh different calculation, but it's not a fair comparison unless you have someone renting in same place since the same time.

[Scallywag]

For sure in California is there a large discrepancy in renting and owning. It's so expensive to own in most places in Cali and the rent is dirt cheap.

And, pray, where in California is this Utopia where "rent is dirt cheap"? Even accounting for "rent control" that "ONLY" permits your landlord to increase your rent by 5% a year? Also, how you define "dirt cheap"? Is it 2K a month for a studio? 3K a month for a one-bedroom? Did you a/c for the fact that that 2K can be up by 5% the following year and so rent never comes down but only goes up (esp when housing is a hot mess)?

[LivingAlmostLarge]

How about $2500 for a 1 bd in SF. Two different friends are paying that much. And my friend is paying $1700 for a 2 bd house that will go for a million but they have rented that house now for 11 years and 11 years ago rent was $1400, it's gone up to $1700 but they can't afford to buy. What does $1700/month rent = $400k mortgage so $500k condo. Um they are renting a house with 2 bd for less than 1 bedroom condo in the area I live. So tell me how it's not cheaper? It absolutely is.

My BIL use to rent in fremont and his complex 2 bd were going for around $3500/month. Condos are selling about $1m+ and are not $3500 so yeah below market value. This is recent as in this year. He bought but is paying something like $5000 for his 2 bedroom in San Jose with PITI he told me so. He was renting a studio for $2500.

My friend's son sold his condo in Campbell 1 bd for $600k, renting in that complex is about $2000-$2200/month her daughter rents in the same area. Again below what it's being paid for. So nope california is not unlike other areas. I have lots of friends and relatives both up north and southern california who will tell you that renting is cheaper. And ask the question will I be a perpetual renter?

[Scallywag]

How about $2500 for a 1 bd in SF. Two different friends are paying that much. And my friend is paying $1700 for a 2 bd house that will go for a million but they have rented that house now for 11 years and 11 years ago rent was $1400, it's gone up to $1700 but they can't afford to buy. What does $1700/month rent = $400k mortgage so $500k condo. Um they are renting a house with 2 bd for less than 1 bedroom condo in the area I live. So tell me how it's not cheaper? It absolutely is.

My BIL use to rent in fremont and his complex 2 bd were going for around $3500/month. Condos are selling about $1m+ and are not $3500 so yeah below market value. This is recent as in this year. He bought but is paying something like $5000 for his 2 bedroom in San Jose with PITI he told me so. He was renting a studio for $2500.

My friend's son sold his condo in Campbell 1 bd for $600k, renting in that complex is about $2000-$2200/month her daughter rents in the same area. Again below what it's being paid for. So nope california is not unlike other areas. I have lots of friends and relatives both up north and southern california who will tell you that renting is cheaper. And ask the question will I be a perpetual renter?

My point exactly. If renting was cheaper than owning then why do people buy / own?

You're fuzzy on the math, aren't you? "Below market value" rent for something you spend $3500 on month after month that you actually get nothing back on whereas only the I, T & I portion of the monthly payments of an owned home is actually "expenses" as most people see it!

I don't even consider HOA & maintenance as "expenses" as they pay for something that retains ot adds value to the property. As for principal - where does the principle go? Into ether? Or into building equity? Do you similarly consider putting money into stocks or bonds to be "expenses"? All things considered, there is NO way rent is cheaper than home ownership in California or everyone would be renting here. The reason people do rent is ironically because they cannot afford the upfront cost of home ownership aka the down payment AND many renters simply wouldn't qualify for their mortgages, due to their income levels, even if mortgages would be cheaper than rent! That's the ugly travesty here.

Do the math again, only considering ITI and see if that helps clear things up. It's that simple, really

[LivingAlmostLarge]

My point exactly. If renting was cheaper than owning then why do people buy / own?

You're fuzzy on the math, aren't you? "Below market value" rent for something you spend $3500 on month after month that you actually get nothing back on whereas only the I, T & I portion of the monthly payments of an owned home is actually "expenses" as most people see it!

I don't even consider HOA & maintenance as "expenses" as they pay for something that retains ot adds value to the property. As for principal - where does the principle go? Into ether? Or into building equity? Do you similarly consider putting money into stocks or bonds to be "expenses"? All things considered, there is NO way rent is cheaper than home ownership in California or everyone would be renting here. The reason people do rent is ironically because they cannot afford the upfront cost of home ownership aka the down payment AND many renters simply wouldn't qualify for their mortgages, due to their income levels, even if mortgages would be cheaper than rent! That's the ugly travesty here.

Do the math again, only considering ITI and see if that helps clear things up. It's that simple, really

Most of the time I think owning is better but there are few locations mostly in expensive areas where it doesn't make sense. My BIL did not buy for many years because it didn't make sense. It still doesn't make sense but at the same time he wanted stability and was willing to pay for it. He made more money investing in the stock market than having bought (he was a gamestop buyer OMG when it was like $1 for years) so he made a lot of money on it. He really liked video games so he bought GME and thought it would hit $20....well you know what happened. He called me and ask how much he would pay on taxes for what profit he made. A lot.

So it is better to buy in the long run usually but it really depends on where you live. In southern california I know having lived there 10 years most of my friends (40s) who bought around 2005-2007 only broke even after more than 10 years and renting for sure was better than buying because you got a LOT more house/condo than buying. And the market in southern california was so nuts and the drop so steep it was easier to walk away. Our condo in So Cal we sold in 6/2005 for $250k went into foreclosure 2x by 2015 because two owners after us LOST their shirts on it. We happened to walk away having bought around $120k and sitting pretty after buying in 2002. Sheer DUMB luck. DH didn't want to be a landlord when we were moving cross country so we said we'd take our profits and sold.

Then in 2005 we bought and I can say it went down like 5% but it costs us way more to BUY than renting. We were paying around $3000/month for our place and we could have been renting for around $2000. So it would have been wiser to rent and we couldn't sell at a breakeven until around 2012/2013. We had been looking at moving then and were like well we have to probably either walk away with NO equity we bought for $550k and were struggling to get that. But the job didn't work out so we didn't move until 2015. And when we bought our rate was 4.25% 7/1 arm which is why we were paying like $3000/month I think in 2005 which was SUBSTANTIALLY more than renting.

But then by 2015 we sold for $725k so we did make money and had refinanced down to a ridiculous 2.625% for a 7/1 arm. So then our payments went way down and we were under a conforming loan. So then things got crazier and we were finally under what it would cost in rent at around $2500/month.

Now we are way ahead but we bought in 2017 and the market has gone nuts equity wise and we refinanced to 2% for a 7/1 arm. So our payments are so ridiculous. We pay more in principal than interest right now. And if we ride our our ARM we'll have saved thousands in interest and principal paydown will put us at a conforming mortgage. So refinancing will probably be better. It's a gamble I'm willing to take.

But basically we are just "renting" our house and will be permenently and will permanently rent our homes. Until we pay it off we are "renting". Glad we bought. But we've been through 3 different markets over 20 years and sustained it. We really were super lucky and took gambles that happened to work out for us. But I mean there is NO way we should have the house we have with the money we've made. No way we should have walked out of graduate school after making $20k/year with $150k in equity to buy a home at 27 and 25 years old and then flip into jobs that allowed us to super charge our savings. We should have been like everyone else and saved for a down payment. But we never did nor did we have help because of luck that allowed us just get ahead. Of course now we aren't planning on our kids having to struggle and hope for luck.

[myrdale]

I'd base the choice of renting or buying on how long I expected to be in the area. And I don't know where the breaking point on that curve is, 3 years? 5 years?

But also, not everyone wants to buy a house. I have an ex-girlfriend who has been renting since we graduated from college 15 years ago.

And for rent being cheaper than a house payment, don't hold your breath on that either. I had a great discussion with a friend last week, who her and her husband rent houses. They've got a small 2 bed room 1 bath house listed at $1,500 / month and she said they had 5 different potential tenants coming over the weekend to look at it.