The purchase dilemma

[Trojan4Life]

Piggs,

Thanks for the feedback, keep it coming.

A little more input from me:

raybyrnes

-Realize rents do rise, but how long will it take to become the same as a mortgage? Math still favors the rental option for the foreseeable future (3 years).

-leverage equals debt…not big on the kind of home I get for that kind of money right now.

– Tax shelter —good point on Capital gains exlusion

– Estate planning — good point

– College accounts are fully funded for kids

Still not convinced on buying though

FLU

I know that I can’t live in my stocks, but we’re talking about a significant amount of difference in rent vs. buy for that price of a home, not to mention the $$$ I’ll tie up with a downpayment.

I’m an investment novice, so I’d be inclined to go rather conservative.

SOBAY1

Not sure how you came up with 8%, I’m definitely in the 25% bracket and used that number in the online calculator I used.

Thanks for all your input.

Trojan4life

[Anonymous]

Trojan –

I think your original post said $4k tax savings and $4k/mo mortgage. I rounded yearly mortgage to $50k and came up w/ 8%… 4k/50k=8%. …. whether your tax savings is 4k or 12k, you’re still not making up for the additional $32k outflow. the only way to justify the purchase, if you’re looking at it as an investment, is to expect some kind of appreciation. Many people don’t expect any appreciation in the SD RE market for years to come.

At some point, buying will make sense again for the common folk. I’m w/ the piggies in thinking that it is not yet the right time.

[Anonymous]

Trojan –

I think your original post said $4k tax savings and $4k/mo mortgage. I rounded yearly mortgage to $50k and came up w/ 8%… 4k/50k=8%. …. whether your tax savings is 4k or 12k, you’re still not making up for the additional $32k outflow. the only way to justify the purchase, if you’re looking at it as an investment, is to expect some kind of appreciation. Many people don’t expect any appreciation in the SD RE market for years to come.

At some point, buying will make sense again for the common folk. I’m w/ the piggies in thinking that it is not yet the right time.

[Anonymous]

Trojan –

I think your original post said $4k tax savings and $4k/mo mortgage. I rounded yearly mortgage to $50k and came up w/ 8%… 4k/50k=8%. …. whether your tax savings is 4k or 12k, you’re still not making up for the additional $32k outflow. the only way to justify the purchase, if you’re looking at it as an investment, is to expect some kind of appreciation. Many people don’t expect any appreciation in the SD RE market for years to come.

At some point, buying will make sense again for the common folk. I’m w/ the piggies in thinking that it is not yet the right time.

[Anonymous]

Trojan –

I think your original post said $4k tax savings and $4k/mo mortgage. I rounded yearly mortgage to $50k and came up w/ 8%… 4k/50k=8%. …. whether your tax savings is 4k or 12k, you’re still not making up for the additional $32k outflow. the only way to justify the purchase, if you’re looking at it as an investment, is to expect some kind of appreciation. Many people don’t expect any appreciation in the SD RE market for years to come.

At some point, buying will make sense again for the common folk. I’m w/ the piggies in thinking that it is not yet the right time.

[Anonymous]

Trojan –

I think your original post said $4k tax savings and $4k/mo mortgage. I rounded yearly mortgage to $50k and came up w/ 8%… 4k/50k=8%. …. whether your tax savings is 4k or 12k, you’re still not making up for the additional $32k outflow. the only way to justify the purchase, if you’re looking at it as an investment, is to expect some kind of appreciation. Many people don’t expect any appreciation in the SD RE market for years to come.

At some point, buying will make sense again for the common folk. I’m w/ the piggies in thinking that it is not yet the right time.

[Anonymous]

I am a potential home buyer in North County, waiting to get in at a reasonable price. Instead of timing the bottom which I believe is quite difficult (else we would all be millionaires :-)), I thought lets go the other way and try to price the bottom. Here’s my simple model for it. Lets start with a base of year 2000 home prices, as I believe the irrarational exuberance commenced around then. For this I looked up a random 2000 sq.ft. 4b/3b home in San Marcos from zillow.com that was about $220,000 in 2000. Assuming a strong local economy home value appreciation should be about 5%-7% annually. So taking an average of 6% compounded growth rate, above home should be valued around $395,000 in 2008. That tells me that if I can get that price, or even lower for a foreclosure, by this year end it might be all right to buy. Same model can be extended for any size home in area you are interested in. I am interested in what other piggington readers think about my reasoning. BTW Rich you the man for coming up with this site. For disclosure, I have no finance or real estate background. I am a faculty in a business school in North County and I like examining such interesting conundrums.

[Anonymous]

I am a potential home buyer in North County, waiting to get in at a reasonable price. Instead of timing the bottom which I believe is quite difficult (else we would all be millionaires :-)), I thought lets go the other way and try to price the bottom. Here’s my simple model for it. Lets start with a base of year 2000 home prices, as I believe the irrarational exuberance commenced around then. For this I looked up a random 2000 sq.ft. 4b/3b home in San Marcos from zillow.com that was about $220,000 in 2000. Assuming a strong local economy home value appreciation should be about 5%-7% annually. So taking an average of 6% compounded growth rate, above home should be valued around $395,000 in 2008. That tells me that if I can get that price, or even lower for a foreclosure, by this year end it might be all right to buy. Same model can be extended for any size home in area you are interested in. I am interested in what other piggington readers think about my reasoning. BTW Rich you the man for coming up with this site. For disclosure, I have no finance or real estate background. I am a faculty in a business school in North County and I like examining such interesting conundrums.

[Anonymous]

I am a potential home buyer in North County, waiting to get in at a reasonable price. Instead of timing the bottom which I believe is quite difficult (else we would all be millionaires :-)), I thought lets go the other way and try to price the bottom. Here’s my simple model for it. Lets start with a base of year 2000 home prices, as I believe the irrarational exuberance commenced around then. For this I looked up a random 2000 sq.ft. 4b/3b home in San Marcos from zillow.com that was about $220,000 in 2000. Assuming a strong local economy home value appreciation should be about 5%-7% annually. So taking an average of 6% compounded growth rate, above home should be valued around $395,000 in 2008. That tells me that if I can get that price, or even lower for a foreclosure, by this year end it might be all right to buy. Same model can be extended for any size home in area you are interested in. I am interested in what other piggington readers think about my reasoning. BTW Rich you the man for coming up with this site. For disclosure, I have no finance or real estate background. I am a faculty in a business school in North County and I like examining such interesting conundrums.

[Anonymous]

I am a potential home buyer in North County, waiting to get in at a reasonable price. Instead of timing the bottom which I believe is quite difficult (else we would all be millionaires :-)), I thought lets go the other way and try to price the bottom. Here’s my simple model for it. Lets start with a base of year 2000 home prices, as I believe the irrarational exuberance commenced around then. For this I looked up a random 2000 sq.ft. 4b/3b home in San Marcos from zillow.com that was about $220,000 in 2000. Assuming a strong local economy home value appreciation should be about 5%-7% annually. So taking an average of 6% compounded growth rate, above home should be valued around $395,000 in 2008. That tells me that if I can get that price, or even lower for a foreclosure, by this year end it might be all right to buy. Same model can be extended for any size home in area you are interested in. I am interested in what other piggington readers think about my reasoning. BTW Rich you the man for coming up with this site. For disclosure, I have no finance or real estate background. I am a faculty in a business school in North County and I like examining such interesting conundrums.

[Anonymous]

I am a potential home buyer in North County, waiting to get in at a reasonable price. Instead of timing the bottom which I believe is quite difficult (else we would all be millionaires :-)), I thought lets go the other way and try to price the bottom. Here’s my simple model for it. Lets start with a base of year 2000 home prices, as I believe the irrarational exuberance commenced around then. For this I looked up a random 2000 sq.ft. 4b/3b home in San Marcos from zillow.com that was about $220,000 in 2000. Assuming a strong local economy home value appreciation should be about 5%-7% annually. So taking an average of 6% compounded growth rate, above home should be valued around $395,000 in 2008. That tells me that if I can get that price, or even lower for a foreclosure, by this year end it might be all right to buy. Same model can be extended for any size home in area you are interested in. I am interested in what other piggington readers think about my reasoning. BTW Rich you the man for coming up with this site. For disclosure, I have no finance or real estate background. I am a faculty in a business school in North County and I like examining such interesting conundrums.

[gb]

The bottom is very close. Unless you can time perfectly it makes sense to buy now. See above link from the NY times.

[gb]

The bottom is very close. Unless you can time perfectly it makes sense to buy now. See above link from the NY times.

[gb]

The bottom is very close. Unless you can time perfectly it makes sense to buy now. See above link from the NY times.

[gb]

The bottom is very close. Unless you can time perfectly it makes sense to buy now. See above link from the NY times.

[Author]

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