Our rent is going up

[Exterous]

My wife and I are in a bit of a quandary about what to do. Here is the situation:
Our rent is going to make a significant jump when our lease is up in 3 months. The total will be around $900 a month. We looked into moving, but rent is very high around here. We would have to go from a townhouse back into an apartment and lose about 400 sq ft (basement) to get any significant decrease in rent (~$150 a month). (We looked into renting houses as well, but this is a college town so all rentals are expensive and getting more so)

Moving out of the area is out of the question since this area is the only place between where I work and where my wife works that would make one of us drive more than 1hr to work.

We were looking to buy a house next year when we had more of a down payment. Our credit is in good shape (although we are waiting on our credit score report) but we don't have much of a down payment now ($5,000)

We have found some really nice houses in the areas for ~$130,000 which would, after insurance and fees make our mortgage around $1050 a month

We have also talked to our landlords and they say they might consider renting 'month to month' and we are concerned that the market will go down even more over the fall.

Should we buy a house and deal with the further housing market downturn and try to take solace in the fact that we will be there for at least 8 years? Is that a mistake?

 

[Juno]

why renting? you gonna move again?

 

[Exterous]

Originally posted by: Juno
why renting? you gonna move again?

We are renting because we are young and haven't bought our first house yet (My wife graduated last summer and has had a big girl job for all of 6 months). It doesn't look like we will be moving any time soon (That answers your question right? I think I might have misunderstood it)

 

[ElFenix]

your rent is going up by $900?

 

[spacejamz]

Originally posted by: ElFenix
your rent is going up by $900?

The total will be around $900 a month

 

[summit]

i'm from cali and the downpayment to my house was ~100k. be glad your housing is still cheap. just consider this... 130 k for your really nice house. lets say the market drops another 15% and since your in a supposedly good area that's very doubtful. most housing usually drops in middle to lower class neighborhoods. but lets say it drops 15% thats 110k. over the course of your 15/20/30 year mortgage the principle is about 1.3k-600 lower a year. thats not very much imo.

then you have a 900 dollar rental payment. you are only tacking on 150 a month into something that will build value overtime. 16% more a month for something that in the long run will benefit you. assuming your mortgage is 6.5% your mortgage payment will be 85 dollars less a month if you have 10k more as a down payment. you can always contribute more to the mortgage... as in pay more principle/interest/extra payment if you have more money laying around per month and that too will lower your interest over the course of your mortgage. p.m. me if you have more questions. i'm writing a book about financial success for 18-27 year olds so i've done my fair share of research.

 

[ElFenix]

Originally posted by: spacejamz

Originally posted by: ElFenix
your rent is going up by $900?

The total will be around $900 a month

could be going up a total of $900.


maybe i just have a different idea of what

rent is very high around here

means

 

[Baked]

I wish houses are 130K around here... fucking dot com boom and soulless greedy real estate agents... Well, houses were 200K 20 years ago anyway.

 

[Loop2kil]

you should never rent long term...housing market sux in most places so try to use that to your advantage and find a steal. both of you are working now and your income will steadily go up over the course of the never few years.

 

[alkemyst]

if you can buy at what you are renting at usually buying is the best deal. Here even with our fked up market in S. Florida it's rare you can score a decent house for the price of a rental.

 

[alkemyst]

Originally posted by: Summit
i'm from cali and the downpayment to my house was ~100k. be glad your housing is still cheap. just consider this... 130 k for your really nice house. lets say the market drops another 15% and since your in a supposedly good area that's very doubtful. most housing usually drops in middle to lower class neighborhoods. but lets say it drops 15% thats 110k. over the course of your 15/20/30 year mortgage the principle is about 1.3k-600 lower a year. thats not very much imo.

then you have a 900 dollar rental payment. you are only tacking on 150 a month into something that will build value overtime. 16% more a month for something that in the long run will benefit you. assuming your mortgage is 6.5% your mortgage payment will be 85 dollars less a month if you have 10k more as a down payment. you can always contribute more to the mortgage... as in pay more principle/interest/extra payment if you have more money laying around per month and that too will lower your interest over the course of your mortgage. p.m. me if you have more questions. i'm writing a book about financial success for 18-27 year olds so i've done my fair share of research.

I don't know what you are bringing downpayment into this except to brag you plopped down $100k.

Doesn't tell us much except you probably had shit credit and picked up a $500k beater in cali.

I put down $80k 13 years ago for my first house when I was just 23, wish I had that cash to blow now. That was nearly 50% in a prime area, 3/2/2 1/2 acre on the water. I could have gotten in for about $5k if I wanted...maybe less.

My last house I just bought in June last year...I got into with nothing down, no closing costs and had 3 credit cards, my first years insurance and taxes covered with the sale plus $500 in a check outside closing for a couple repairs.

 

[Exterous]

Originally posted by: ElFenix

Originally posted by: spacejamz

Originally posted by: ElFenix
your rent is going up by $900?

The total will be around $900 a month

could be going up a total of $900.


maybe i just have a different idea of what

rent is very high around here

means

Perhaps I should have amended that with "Our rent is very high for our state" The total rent will be $900 with nothing else included but water (Its going up by $100 a month)

Originally posted by: Baked
I wish houses are 130K around here... fucking dot com boom and soulless greedy real estate agents... Well, houses were 200K 20 years ago anyway.

Hey, living in one of the worst states economically has to have some advantages right?

 

[Kadarin]

My lease is up in a few months also, but my problem is that I live in the SF Bay Area. Rent on a 1-bedroom apartment for me is currently $1265/mo, but going to raise about $125/month when the lease is up. I'd like to buy, but townhouses start at around $400k here. Right now I'm single, so it would be just my income alone that's going toward the house, which is something that makes me nervous if the economy gets worse.

So most likely I will renew the lease for another year, while I save more toward a larger downpayment. This sucks, because I can *almost* afford a townhouse here.

 

[Exterous]

Thanks for the replies guys. That what we were thinking but I guess I just wanted a sounding board that we weren't making a big mistake

 

[BZeto]

I've been paying $910 for a shitty 1 Bd apartment for the last 4 months. If only I could split that in half

 

[TastesLikeChicken]

If you plan on staying in the area long enough to ride out the current housing slump and build some equity in the house then you're better off buying a place of your own.

Just keep in mind that buying a house means you're responsible for maintenance/upkeep/upgrades as well, for which you can budget at the very least another $200 - $300+ a month for. Add that to insurance and property taxes that gradually rise every year and costs can creep up on you.

Still, if you can afford it, do it. Right now you're putting a whole $900 a month in someone elses pocket. With home ownership at least you're putting a portion of your monthly payment back in your own, a portion that increases as the years go on. When the housing market booms again years down the road, and it will, you could be in a position to stuff a tidy sum in your wallet.

 

[summit]

Originally posted by: alkemyst

Originally posted by: Summit
i'm from cali and the downpayment to my house was ~100k. be glad your housing is still cheap. just consider this... 130 k for your really nice house. lets say the market drops another 15% and since your in a supposedly good area that's very doubtful. most housing usually drops in middle to lower class neighborhoods. but lets say it drops 15% thats 110k. over the course of your 15/20/30 year mortgage the principle is about 1.3k-600 lower a year. thats not very much imo.

then you have a 900 dollar rental payment. you are only tacking on 150 a month into something that will build value overtime. 16% more a month for something that in the long run will benefit you. assuming your mortgage is 6.5% your mortgage payment will be 85 dollars less a month if you have 10k more as a down payment. you can always contribute more to the mortgage... as in pay more principle/interest/extra payment if you have more money laying around per month and that too will lower your interest over the course of your mortgage. p.m. me if you have more questions. i'm writing a book about financial success for 18-27 year olds so i've done my fair share of research.

I don't know what you are bringing downpayment into this except to brag you plopped down $100k.

Doesn't tell us much except you probably had shit credit and picked up a $500k beater in cali.

I put down $80k 13 years ago for my first house when I was just 23, wish I had that cash to blow now. That was nearly 50% in a prime area, 3/2/2 1/2 acre on the water. I could have gotten in for about $5k if I wanted...maybe less.

My last house I just bought in June last year...I got into with nothing down, no closing costs and had 3 credit cards, my first years insurance and taxes covered with the sale plus $500 in a check outside closing for a couple repairs.

you don't know me kid. i'm just saying that his 130k of house is super affordable compared to my house in cali. come check my house out its no beater. how was your interest rate on that house with no money down? the only thing you save is on the interest rate.

 

[BigDH01]

Originally posted by: TastesLikeChicken
If you plan on staying in the area long enough to ride out the current housing slump and build some equity in the house then you're better off buying a place of your own.

Just keep in mind that buying a house means you're responsible for maintenance/upkeep/upgrades as well, for which you can budget at the very least another $200 - $300+ a month for. Add that to insurance and property taxes that gradually rise every year and costs can creep up on you.

Still, if you can afford it, do it. Right now you're putting a whole $900 a month in someone elses pocket. With home ownership at least you're putting a portion of your monthly payment back in your own, a portion that increases as the years go on. When the housing market booms again years down the road, and it will, you could be in a position to stuff a tidy sum in your wallet.

This is not necessarily true. That portion of your monthly payment that actually reduces the principle is being used to buy an asset, not going into a savings account. Like any asset, the value of your home could rise or fall. We are certainly seeing that now. Believe it or not, there are places in the country, such as Detroit, where homes purchased even in reasonable housing markets are now worth squat. Not exactly a good savings plan.

If you can rent or buy at the same price, I'd choose renting. Take that 200-300 extra a month you'll spend in property taxes and maintenance and put it into a savings account or buy more liquid assets such as equities. This gives you maximum flexibility and allows you to liquidate your position quickly if the value of your assets begin to drop. Look at how many people now can't sell their homes. If you can't sell your home, what's it really worth?

 

[mshan]

NY Times Rent vs. Buy Calculator: http://www.nytimes.com/2007/04....html?_r=1&oref=slogin

That being said, looking at these macrostatistics suggests Ann Arbor is a very affordable area vs. it's historic norms (perhaps because of secular economic decline, with superimposed subprime crisis), so if you are comfortable living there on a long term basis, prices may be very competitive (you have got to find some properties you are interested in and compare to peak prices and current trend for comparable properties to get more realistic assessment and just make sure prices are just not going to keep going down because of foreclosures and higher crime rates - is it a good value, or cheap for a very good reason):
http://realestateconsulting.co...tter=Local/local200706
http://realestateconsulting.co...tter=Local/local200803

You might also need 20% down and credit score in 700s to even get good mortgage rate.
http://www.amazon.com/Home-Buy...&qid=1206899521&sr=1-1
http://www.amazon.com/Mortgage...&qid=1206899491&sr=8-1

 

[Special K]

Originally posted by: mshan
NY Times Rent vs. Buy Calculator: http://www.nytimes.com/2007/04....html?_r=1&oref=slogin

That being said, looking at these macrostatistics suggests Ann Arbor is a very affordable area vs. it's historic norms (perhaps because of secular economic decline, with superimposed subprime crisis), so if you are comfortable living there on a long term basis, prices may be very competitive (you have got to find some properties you are interested in and compare to peak prices and current trend for comparable properties to get more realistic assessment and just make sure prices are just not going to keep going down because of foreclosures and higher crime rates - is it a good value, or cheap for a very good reason):
http://realestateconsulting.co...tter=Local/local200706
http://realestateconsulting.co...tter=Local/local200803

You might also need 20% down and credit score in 700s to even get good mortgage rate.
http://www.amazon.com/Home-Buy...&qid=1206899521&sr=1-1
http://www.amazon.com/Mortgage...&qid=1206899491&sr=8-1

Wow, that rent vs. own calculator is really neat. :thumbsup:

EDIT: WTF, now it's asking me to register. The first time I clicked on it, it took me right to the article.

 

[mshan]

You have to go into advanced settings and change default settings to your actual situation to get more accurate results, though:
http://www.nytimes.com/2007/04...7_BUYRENT_GRAPHIC.html

 

[xgsound]

Since the wife has only worked for 6 months, she won't be adding much to the credit score. After another year her score (assuming no CC/ car debt) will help greatly. If you both work a year or two and have no cc/ car/ school loan debt that should give a 750+ credit score.

If you stand renting for another year that will also give you a chance to build up a down payment in addition to the $5,000 you already have for emergencies. In the meantime keep checking www.realtor.com in your zip codes so you can recognize a deal a year from now.

Jim

 

[TastesLikeChicken]

Originally posted by: BigDH01

Originally posted by: TastesLikeChicken
If you plan on staying in the area long enough to ride out the current housing slump and build some equity in the house then you're better off buying a place of your own.

Just keep in mind that buying a house means you're responsible for maintenance/upkeep/upgrades as well, for which you can budget at the very least another $200 - $300+ a month for. Add that to insurance and property taxes that gradually rise every year and costs can creep up on you.

Still, if you can afford it, do it. Right now you're putting a whole $900 a month in someone elses pocket. With home ownership at least you're putting a portion of your monthly payment back in your own, a portion that increases as the years go on. When the housing market booms again years down the road, and it will, you could be in a position to stuff a tidy sum in your wallet.

This is not necessarily true. That portion of your monthly payment that actually reduces the principle is being used to buy an asset, not going into a savings account. Like any asset, the value of your home could rise or fall. We are certainly seeing that now. Believe it or not, there are places in the country, such as Detroit, where homes purchased even in reasonable housing markets are now worth squat. Not exactly a good savings plan.

If you can rent or buy at the same price, I'd choose renting. Take that 200-300 extra a month you'll spend in property taxes and maintenance and put it into a savings account or buy more liquid assets such as equities. This gives you maximum flexibility and allows you to liquidate your position quickly if the value of your assets begin to drop. Look at how many people now can't sell their homes. If you can't sell your home, what's it really worth?

That's why I initially mentioned:

"If you plan on staying in the area long enough to ride out the current housing slump and build some equity in the house..."

The slump won't last forever and housing prices are beginning to bottom out. They've dropped quite a bit already and aren't likely to drop a whole lot further. Once all this shakes out and the housing market heats up again, and it will, housing values will begin to jump up again.

 

[BigDH01]

Originally posted by: TastesLikeChicken

Originally posted by: BigDH01

Originally posted by: TastesLikeChicken
If you plan on staying in the area long enough to ride out the current housing slump and build some equity in the house then you're better off buying a place of your own.

Just keep in mind that buying a house means you're responsible for maintenance/upkeep/upgrades as well, for which you can budget at the very least another $200 - $300+ a month for. Add that to insurance and property taxes that gradually rise every year and costs can creep up on you.

Still, if you can afford it, do it. Right now you're putting a whole $900 a month in someone elses pocket. With home ownership at least you're putting a portion of your monthly payment back in your own, a portion that increases as the years go on. When the housing market booms again years down the road, and it will, you could be in a position to stuff a tidy sum in your wallet.

This is not necessarily true. That portion of your monthly payment that actually reduces the principle is being used to buy an asset, not going into a savings account. Like any asset, the value of your home could rise or fall. We are certainly seeing that now. Believe it or not, there are places in the country, such as Detroit, where homes purchased even in reasonable housing markets are now worth squat. Not exactly a good savings plan.

If you can rent or buy at the same price, I'd choose renting. Take that 200-300 extra a month you'll spend in property taxes and maintenance and put it into a savings account or buy more liquid assets such as equities. This gives you maximum flexibility and allows you to liquidate your position quickly if the value of your assets begin to drop. Look at how many people now can't sell their homes. If you can't sell your home, what's it really worth?

That's why I initially mentioned:

"If you plan on staying in the area long enough to ride out the current housing slump and build some equity in the house..."

The slump won't last forever and housing prices are beginning to bottom out. They've dropped quite a bit already and aren't likely to drop a whole lot further. Once all this shakes out and the housing market heats up again, and it will, housing values will begin to jump up again.

Traditionally, housing values nationally appreciate at the rate of inflation +1 or 2% in some areas and slightly down in others. The years 2001 to 2006 were the exceptions to the rule.

 

[Omegachi]

try living in Hawaii, the price to buy a place here is rediculously high. and ha, rent? average is about 1200 for a 1 bedroom.