Is it time to buy a house or keep renting?

I've been not too concerned with buying a house as I thought there was a good chance interest rates would drop along with prices. Now the low interest rates are here and I have no idea how long this may last. It seems to be up to what the government does and not sure I can predict that. Is it better to buy now and suck it up if prices drop or to hold out for future price drops?

Specific to my situation: prices were rising in my area until mid-2007. Sellers are not wanting to lower their prices very much as of yet preferring to hold onto their house or rent it (although many houses are sitting empty). Average selling price is 95% of list price. It seems if you want a house, you have to wait a few months until sellers decide to lower their price and then make an offer. A lot of people don't want to sell in this market. The number of houses for sale is decreasing and most that are there have been there for a long time so there's not a lot to choose from.

We have owned before, but are currently renting. We have enough to put 20% or more down on a home purchase. We don't plan on leaving the area or selling for a long time after purchasing a house. However, I don't want to be in a position where we can't move or sell because prices have dropped so much that we are underwater in the mortgage. I don't mind being in a rental, but I don't feel at home because we're constantly looking for a house to purchase--not knowing if we will move soon, having to keep credit scores up (I like to use rewards cards, but FICO doesn't like me having balances on 5 cards so I pay off before statement cuts), not wanting to fully unpack from previous move in case we have to pack up again soon, etc.

Here are the numbers from our area:

Month      Median price
Nov. 2008  $217,500
Oct. 2008  $265,000
Sept. 2008 $253,750
Aug. 2008  $254,292
July 2008  $277,625
June 2008  $285,000
May 2008   $257,750
April 2008 $290,000
March 2008 $255,000
Feb. 2008  $249,900
Jan. 2008  $299,900
Dec. 2007  $263,000
Nov. 2007  $275,000
Oct. 2007  $298,750
Sept. 2007 $280,000
Aug. 2007  $274,250
July 2007  $288,397
June 2007  $314,192
May 2007   $299,950
April 2007 $295,000
March 2007 $304,000
Feb. 2007  $295,000
Jan. 2007  $278,691
Dec. 2006  $252,000
Nov. 2006  $320,250

Local news article: Real Estate Prices Sink to New Two-Year Low

Median Home Price Charting Tool select Corvallis, OR

I don't know!

If the unemployment rate goes up another 3-4 percent in your area, how will that affect home prices?

Those prices seem extremely high for such a rural area. Corvallis always struck me as the kind of small town that wanted to play the real estate bubble game, but never really had the fundamentals to compete with the big city.

Also, November is the first month to see a significant decline. I'd wait a couple months to see if the trend continues. I don't think I'd start to seriously consider buying until the median stabilized.

JTFH said: When asking myself the same question I figured:
yearly interest costs + taxes + insurance + maintenance + whatever else you get with a house (not a homeowner yet) - tax benefits - how much it means to you to own your own house...

Divide that by 12, is it more than you are paying in rent you might want to reconsider purchasing as it is no longer the ruling zeitgeist that housing increases in price no matter what.

For me the yearly overhead of home ownership came to about 2.3x what I currently pay in rent... So, IMHO I'd be an idiot to buy a house. Not to mention the threat of lost principle should you ever default.

You need to compare 'total cost of ownership' for buy vs. rent. Apart from everything you mention the biggest part of TCO for buying is equity decrease in a declining market. Think of it this way: If home prices in your area go down by just 1%, due to a 1:5 leverage (assuming you are paying down 20%), your loss is 5%. It just doesn't make any sense buying at this time in most of the country. Wait for a time when house prices are increasing, even if you miss the bottom of the market. While you might apparently pay more, in truth, you will be making money, not losing it on your home equity.

Xnarg said: The bottom will pass long before we realize it, yet many will be confident it has passed when it hasn't.

You don't need to know when it has been hit, just be confident that it has passed

Xnarg said: zabcd said: Xnarg said: The bottom will pass long before we realize it, yet many will be confident it has passed when it hasn't.You don't need to know when it has been hit, just be confident that it has passed...and how will one know for sure that a slight uptick isn't just a blip?

My point is that it's very hard to have confidence that a bottom has passed until long after the fact.

Agreed. Yet, better take your chances on a blip, than right now when you know prices are declining for sure.

If everyone in this forum says BUY BUY BUY... will you buy it ???

Come on give us a break, you know what is best for you.

NYTimes somewhat recently posted a calculator for this:

Is It Better to Buy or Rent?

With house prices in my area, I'm not going to be buying a house anytime soon.

I would say time to buy, but I don't know your situation. I will do a short sale, and you don't know my story behind. You know what is best for you. Find a good realtor and talk to him/her about your situation. Even before you start looking for a realtor, you still know what is better for you.

Short Answer = No.

There is going to be a major shift in the way we live our lives atleast for the next few years. I think this downturn has really taken a huge toll. I would say for now sacrificing the home-ownership is the way to go and enjoy the normal life. Wait till the end of 2009 and think in 2010. Wait on the sideline and watch thousands of people going naked.

Wait

Every bear market has bull rallies. THis current euphoria in homes prices is due to low interest rates.

Wait until we have these interest rates for a couple of years.

Supply and Demand ultimtely effects every market.

But for certain very very select areas of the country (Asian neighborhoods in SOCAL) there is no demand.

None.

Sellers are holding on waiting for their prices. SuperObama can't make someone offer you what you paid in 2005-2007. Won't happen buddy.

When there are NO POSTS ON FWF for 3 months about foreclosure auctions or "Should I buy a house now??" is the time to buy.

1 year after the current "knife-catchers" and Fliplords start learning the perils and pitfalls of being cashflow landlords WITH NO RENT COMING IN, will be the time to buy.

But what do I know.

Xnarg said: The gas will pass long before we realize it, yet many will be confident it has passed when it hasn't.

patch96 said: Wait

Every bear market has bull rallies. THis current euphoria in homes prices is due to low interest rates.

Wait until we have these interest rates for a couple of years.

Supply and Demand ultimtely effects every market.

But for certain very very select areas of the country (Asian neighborhoods in SOCAL) there is no demand.

None.

Sellers are holding on waiting for their prices. SuperObama can't make someone offer you what you paid in 2005-2007. Won't happen buddy.

When there are NO POSTS ON FWF for 3 months about foreclosure auctions or "Should I buy a house now??" is the time to buy.

1 year after the current "knife-catchers" and Fliplords start learning the perils and pitfalls of being cashflow landlords WITH NO RENT COMING IN, will be the time to buy.

But what do I know.

Smart. But I would also add, why buy? Just keep waiting, eventually houses will come down in price as more are built. And more WILL be built because home builders have to continue saturating the market with their sticks & bricks in order to stay in business. Just wait. Eventually, that 100k home will be 50k, then 40k, etc.

There is no way to sustain the current home buying craze. At some point, rates MUST rise in order to curb inflation or else we'll have bigger problems than just home prices.

vstrt said: 1. just take a look at how many "incentives" the govt. has to offer to get people to buy a home. Will these incentives grow over time? If not, will "not having them" affect property values 5 - 10 years down the line?There is only one unusual and time sensitive incentive that exists out there, which is the $7,500 tax deduction that can be taken advantage of by first time homebuyers. Other than the standard mortgage deduction, which has been in existence for dozens of years and is not scheduled to change any time soon, there are no other incentives out there.

2. By buying a home, you are essentially opting for double taxation. How you ask? Well, one you have to take POST tax dollars and buy your home. Then, you have to use POST tax dollars (dollars you have already been taxed on) and pay the mortgage, insurance and Property Tax on the property (regardless if you use the property as your residence or investment income). So, if you live in the house, you STILL pay tax, insurance. Whereas if you hold a CD paying 5 - 6%, the PRINCIPAL is not taxed repeatedly YEAR AFTER YEAR AFTER YEAR. Only the investment income/interest payments are taxed. Let's not forget the headache of dealing with tenants.Huh? Whether you buy or rent, you are paying mortgage, insurance and property tax. The difference is that if you own, you are directly responsible for these charges whereas if you rent, your landlord is passing on these charges to you.

3. if you buy a home for investment income, you are COMPETING with the government and banks. Why you ask? Well both govt. and banks can foreclose on ANY property for failure to make tax or mortgage payments. In doing so, they can set the price of your asset higher, lower as they feel fit -- thereby affecting your property value. They can also subject their foreclosed properties to being rented out to low income families, thereby reducing your property value and rental value.Yep, that's absolutely true. The OP wants to buy a primary residence, not an investment property, but with either one he'd be required to assume the risk that his neighbors' property values will not drag his property value down. That's one of the risks inherent in home ownership.

4. Simply put, if you buy a home now and interest rates rise in the future, you are doomed because the person getting the loan to buy your property has to pay more to borrow the money to buy it. Therefore, with rates so artificially low, who's to say that when you go to sell or rent it, rates will not be higher? Then what? Are you saying the home value of today is going to hold up or rise when rates rise? i think notThere is some truth to it but you are forgetting to mention other relevant considerations. You might've heard of the credit crunch and the credit crisis out there, which, in very simple terms, have caused the spreads to widen between the rates at which banks get money and the rates at which they loan them out. This has caused retail mortgage rates to be significantly higher than they would ordinarily be given market conditions. The government has decided to do something about the widening spreads and is buying up MBS, which is bringing the retail mortgage rates down to where they would be if it wasn't for the credit crisis. In other words, although the currently low mortgage rates are "artificial," so are the reasons that the rates were so high to begin with, so there is not necessarily a reason to expect them to spike up to unreasonably high levels once the credit crisis is over.

Further, the overall state of the economy and consumer sentiment have a profound effect on all asset prices, including housing, which is the reason that asset prices tend to go down during a recession and then spike up during boom years. Hence, low interest rates serve as a powerful economic stimulus that spurs purchases of depressed assets and other economic forces then take over and carry asset prices up.

5. If housing was such a great deal for the consumer, then would NOT have to put so many incentives in place to get you to buy it.One of the reasons that in some (definitely not all, but some) cases housing is a great deal for the consumer is because housing prices are greatly depressed, interest rates are low and the amount of hysteria out there is high. Are you saying that if you see a sale on an item you don't buy it because the sale price makes you suspicious?

6. Even after you've paid off your house, you still have to pay taxes & insurance -- both of which will rise over time unless there's another spurt of housing supply which will enable property taxes to fall, but that will also affect your resale value and rent value. What's your point? Again, both homeowners as well as tenants pay taxes and insurance -- homeowners do so directly while tenants' payments are passed through to them by their landlords.

So, in a nutshell, buying a house "just because" interest rates are low is a terrible idea.Did anyone EVER suggest that you should be buying anything "just because" interest rates are low? People are saying that depressed housing values combined with low interest rates create a great buying opportunity for a lot of people.

geo123 said: vstrt said: 1. just take a look at how many "incentives" the govt. has to offer to get people to buy a home. Will these incentives grow over time? If not, will "not having them" affect property values 5 - 10 years down the line?There is only one unusual and time sensitive incentive that exists out there, which is the $7,500 tax deduction that can be taken advantage of by first time homebuyers. Other than the standard mortgage deduction, which has been in existence for dozens of years and is not scheduled to change any time soon, there are no other incentives out there.

2. By buying a home, you are essentially opting for double taxation. How you ask? Well, one you have to take POST tax dollars and buy your home. Then, you have to use POST tax dollars (dollars you have already been taxed on) and pay the mortgage, insurance and Property Tax on the property (regardless if you use the property as your residence or investment income). So, if you live in the house, you STILL pay tax, insurance. Whereas if you hold a CD paying 5 - 6%, the PRINCIPAL is not taxed repeatedly YEAR AFTER YEAR AFTER YEAR. Only the investment income/interest payments are taxed. Let's not forget the headache of dealing with tenants.Huh? Whether you buy or rent, you are paying mortgage, insurance and property tax. The difference is that if you own, you are directly responsible for these charges whereas if you rent, your landlord is passing on these charges to you.

3. if you buy a home for investment income, you are COMPETING with the government and banks. Why you ask? Well both govt. and banks can foreclose on ANY property for failure to make tax or mortgage payments. In doing so, they can set the price of your asset higher, lower as they feel fit -- thereby affecting your property value. They can also subject their foreclosed properties to being rented out to low income families, thereby reducing your property value and rental value.Yep, that's absolutely true. The OP wants to buy a primary residence, not an investment property, but with either one he'd be required to assume the risk that his neighbors' property values will not drag his property value down. That's one of the risks inherent in home ownership.

4. Simply put, if you buy a home now and interest rates rise in the future, you are doomed because the person getting the loan to buy your property has to pay more to borrow the money to buy it. Therefore, with rates so artificially low, who's to say that when you go to sell or rent it, rates will not be higher? Then what? Are you saying the home value of today is going to hold up or rise when rates rise? i think notThere is some truth to it but you are forgetting to mention other relevant considerations. You might've heard of the credit crunch and the credit crisis out there, which, in very simple terms, have caused the spreads to widen between the rates at which banks get money and the rates at which they loan them out. This has caused retail mortgage rates to be significantly higher than they would ordinarily be given market conditions. The government has decided to do something about the widening spreads and is buying up MBS, which is bringing the retail mortgage rates down to where they would be if it wasn't for the credit crisis. In other words, although the currently low mortgage rates are "artificial," so are the reasons that the rates were so high to begin with, so there is not necessarily a reason to expect them to spike up to unreasonably high levels once the credit crisis is over.

Further, the overall state of the economy and consumer sentiment have a profound effect on all asset prices, including housing, which is the reason that asset prices tend to go down during a recession and then spike up during boom years. Hence, low interest rates serve as a powerful economic stimulus that spurs purchases of depressed assets and other economic forces then take over and carry asset prices up.

5. If housing was such a great deal for the consumer, then would NOT have to put so many incentives in place to get you to buy it.One of the reasons that in some (definitely not all, but some) cases housing is a great deal for the consumer is because housing prices are greatly depressed, interest rates are low and the amount of hysteria out there is high. Are you saying that if you see a sale on an item you don't buy it because the sale price makes you suspicious?

6. Even after you've paid off your house, you still have to pay taxes & insurance -- both of which will rise over time unless there's another spurt of housing supply which will enable property taxes to fall, but that will also affect your resale value and rent value. What's your point? Again, both homeowners as well as tenants pay taxes and insurance -- homeowners do so directly while tenants' payments are passed through to them by their landlords.

So, in a nutshell, buying a house "just because" interest rates are low is a terrible idea.Did anyone EVER suggest that you should be buying anything "just because" interest rates are low? People are saying that depressed housing values combined with low interest rates create a great buying opportunity for a lot of people.

I could spend an hour going point by point over what you said, but I'll just sum this up like this:

The "HOUSE" is the new "tulip bulb" Tulips

Just like the tulip bulb craze, EVERYBODY and their janitor has to buy a house "just because".

When EVERYBODY stops pushing homes like crack, then that is when it will be appealing to buy one. Until then, there is NO REASON to buy a home period.

vstrt said: ...And more WILL be built because home builders have to continue saturating the market with their sticks & bricks in order to stay in business. Just wait. Eventually, that 100k home will be 50k, then 40k, etc...Many home builders are already out of business, others are in business in name only, and almost all construction has halted. Banks are not lending on any new construction projects. Nationally, building permits are running about 50% below last year. As of April, housing starts were at a 17 year low.