An observation on waiting to buy

[davelj]

Actually, joe, that’s NOT “the kind of thinking that went into this bubble in the first place.” The kind of thinking that produced this bubble was the idea that price appreciation would more than offset any problems with negative cash flow. Had people bought houses purely based on cash economics we wouldn’t be where we are today. I’m NOT suggesting that people use I/O loans. I merely used an I/O loan for the purposes of making a better economic comparison to renting from a tax standpoint. I thought I made that clear in one of my posts. Personally, I have a fully-amortizing 30-year fixed-rate mortgage. I’d say that if you’re buying a home at a price in which your mortgage+tax+HOA payments are roughly equivalent to the rent you’d pay, in the long run you’ll be better off owning than renting, assuming you’re planning to stay awhile. In such a case, insulating yourself from the “rental cost increase” generally more than offsets most of the other issues you raised. But, to say it AGAIN, in most of SD we aren’t there yet. It still makes more sense to rent.

[Running Bear]

davelj,

You are leaving out a few other inputs that I would include.
Taking CA as an example we all know that the state and cities are having some serious issues with funding. Are you sure that the state/city won’t raise property taxes to help make up the shortfall in the next few years? How would that effect your rent vs buy calculation.

Or what if they decide to raise income tax. If I am a renter I have the flexibility to downsize very easily to reduce my costs to weather the storm. What if the buyer has a job loss in the next couple of years? As a renter I have the flexibility to relocate to find another job.

I know most people out there believe this will be short and shallow, but if this turns out to be worse then that, holding off and not buying in the next couple years will insure you don’t set yourself up for pain. This housing correction will not be a V shaped bottom. We will bounce on the bottom for many months. It isn’t going to be hard to wait and buy within a few percent of the bottom. Be patient and protect your wealth from being put at risk.

My2cents

[Running Bear]

davelj,

You are leaving out a few other inputs that I would include.
Taking CA as an example we all know that the state and cities are having some serious issues with funding. Are you sure that the state/city won’t raise property taxes to help make up the shortfall in the next few years? How would that effect your rent vs buy calculation.

Or what if they decide to raise income tax. If I am a renter I have the flexibility to downsize very easily to reduce my costs to weather the storm. What if the buyer has a job loss in the next couple of years? As a renter I have the flexibility to relocate to find another job.

I know most people out there believe this will be short and shallow, but if this turns out to be worse then that, holding off and not buying in the next couple years will insure you don’t set yourself up for pain. This housing correction will not be a V shaped bottom. We will bounce on the bottom for many months. It isn’t going to be hard to wait and buy within a few percent of the bottom. Be patient and protect your wealth from being put at risk.

My2cents

[Running Bear]

davelj,

You are leaving out a few other inputs that I would include.
Taking CA as an example we all know that the state and cities are having some serious issues with funding. Are you sure that the state/city won’t raise property taxes to help make up the shortfall in the next few years? How would that effect your rent vs buy calculation.

Or what if they decide to raise income tax. If I am a renter I have the flexibility to downsize very easily to reduce my costs to weather the storm. What if the buyer has a job loss in the next couple of years? As a renter I have the flexibility to relocate to find another job.

I know most people out there believe this will be short and shallow, but if this turns out to be worse then that, holding off and not buying in the next couple years will insure you don’t set yourself up for pain. This housing correction will not be a V shaped bottom. We will bounce on the bottom for many months. It isn’t going to be hard to wait and buy within a few percent of the bottom. Be patient and protect your wealth from being put at risk.

My2cents

[Running Bear]

davelj,

You are leaving out a few other inputs that I would include.
Taking CA as an example we all know that the state and cities are having some serious issues with funding. Are you sure that the state/city won’t raise property taxes to help make up the shortfall in the next few years? How would that effect your rent vs buy calculation.

Or what if they decide to raise income tax. If I am a renter I have the flexibility to downsize very easily to reduce my costs to weather the storm. What if the buyer has a job loss in the next couple of years? As a renter I have the flexibility to relocate to find another job.

I know most people out there believe this will be short and shallow, but if this turns out to be worse then that, holding off and not buying in the next couple years will insure you don’t set yourself up for pain. This housing correction will not be a V shaped bottom. We will bounce on the bottom for many months. It isn’t going to be hard to wait and buy within a few percent of the bottom. Be patient and protect your wealth from being put at risk.

My2cents

[Running Bear]

davelj,

You are leaving out a few other inputs that I would include.
Taking CA as an example we all know that the state and cities are having some serious issues with funding. Are you sure that the state/city won’t raise property taxes to help make up the shortfall in the next few years? How would that effect your rent vs buy calculation.

Or what if they decide to raise income tax. If I am a renter I have the flexibility to downsize very easily to reduce my costs to weather the storm. What if the buyer has a job loss in the next couple of years? As a renter I have the flexibility to relocate to find another job.

I know most people out there believe this will be short and shallow, but if this turns out to be worse then that, holding off and not buying in the next couple years will insure you don’t set yourself up for pain. This housing correction will not be a V shaped bottom. We will bounce on the bottom for many months. It isn’t going to be hard to wait and buy within a few percent of the bottom. Be patient and protect your wealth from being put at risk.

My2cents

[joestool]

“In such a case, insulating yourself from the ‘rental cost increase’ generally more than offsets most of the other issues you raised.”

Past performance is no indication of future returns.

[joestool]

“In such a case, insulating yourself from the ‘rental cost increase’ generally more than offsets most of the other issues you raised.”

Past performance is no indication of future returns.

[joestool]

“In such a case, insulating yourself from the ‘rental cost increase’ generally more than offsets most of the other issues you raised.”

Past performance is no indication of future returns.

[joestool]

“In such a case, insulating yourself from the ‘rental cost increase’ generally more than offsets most of the other issues you raised.”

Past performance is no indication of future returns.

[joestool]

“In such a case, insulating yourself from the ‘rental cost increase’ generally more than offsets most of the other issues you raised.”

Past performance is no indication of future returns.

[nostradamus]

Hi Running Bear,

Proposition 13 is supposed to protect us from a property tax increase; however, mello-roos were invented to get around that.

[nostradamus]

Hi Running Bear,

Proposition 13 is supposed to protect us from a property tax increase; however, mello-roos were invented to get around that.

[nostradamus]

Hi Running Bear,

Proposition 13 is supposed to protect us from a property tax increase; however, mello-roos were invented to get around that.

[nostradamus]

Hi Running Bear,

Proposition 13 is supposed to protect us from a property tax increase; however, mello-roos were invented to get around that.

[Author]

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