For folks who are residing in American Continent, I hear your pain. With retail banking only paying a miniscule 1% on your heard earned money in any retail banking products such as saving, checking and money market plus a less than 2% in any of CD products, traditional savers and hardworkers are left to no choice except invest in other place.
Many families are traditionally being told by their parents generation to save and to eventually purchase home where they can put their family root.
The recent housing bust in US shattered many typical white-picket-fences American Dream. For people who enter the housing market prior to 2000, they might be on the last defense of their enter price. Whereas those who bought afterwards, particularly many who use ARMs mortgage financing in California, got their peak price of 2004-2006 popped out losing more than 30% by now off the house peak price.
Nonetheless, these days many younger generation especially generation X and Y who are in our 20s and 30s are starting to decide whether it is a wise decision to buy house right now or to rent.
Declining trends among new house sale in Q2 and Q3 2011 with sporadic price incline and stubborn high-price area such as in San Francisco Bay Area, Santa Monica and Culvert City in Los Angeles area, Hawaii and the Manhattan in NYC make us speculate when truly the bottom is or will be.
Simple calculation to compare between Buying and Renting:
(Buying Price - Downpayment) x flat mortgage interest rate / 12 = average monthly payment
Expenses that unavoidable such as utilities, home or condo association fee, property tax and home insurace, must be added on top of the mortgage payment ---> BC
Other factors that might be a deal breaker are:
- how far the commute from work or daily necessities (groceries, children healthcare, etc) to the rental home or to the bought home.
With gas price at this high in overall major cities, commuting time has become a major decision factor in buying house
- maintenance cost related to the condition and the age of the house. The older the house the more little unexpected things may happen and lead to higher maintenance cost such as wiring, plumbing, roofing, airconditioning / heating, and so on. However, if you score a foreclosed home or a short-sale house at lower than market value, it may cost you too to repair some damages left by the unhappy previous owners/ renters. This is another big dent to your wallet.
Now, we can compare the number derived from above calculation to this Renting Cost :
Rental Price + Security Deposit = RC
Expenses that related to renting is much less than buying a house or a condo / apartment. Usually heating , trash and garbage disposal, parking and water is already included. There is no association fee and no property tax to pay as the major advantage.
Simply, we now can compare BC and RC on month-to-month basis or yearly basis.
In a healthy economy where the housing price tends to go up, buyers are inclined to buy rather than rent because buyer can build equity.
In a trendless or declining economy, where jobs are uncertain and scarce, coupled by declining housing price, buyer prefers to become renter except in metropolitan areas where rental price keeps skyrocketing due to surplus demand.
In this case, one would be better off renting and saving more cash to pay larger chunk on the down payment when he / she decides to buy
Many families are traditionally being told by their parents generation to save and to eventually purchase home where they can put their family root.
The recent housing bust in US shattered many typical white-picket-fences American Dream. For people who enter the housing market prior to 2000, they might be on the last defense of their enter price. Whereas those who bought afterwards, particularly many who use ARMs mortgage financing in California, got their peak price of 2004-2006 popped out losing more than 30% by now off the house peak price.
Nonetheless, these days many younger generation especially generation X and Y who are in our 20s and 30s are starting to decide whether it is a wise decision to buy house right now or to rent.
Declining trends among new house sale in Q2 and Q3 2011 with sporadic price incline and stubborn high-price area such as in San Francisco Bay Area, Santa Monica and Culvert City in Los Angeles area, Hawaii and the Manhattan in NYC make us speculate when truly the bottom is or will be.
Simple calculation to compare between Buying and Renting:
(Buying Price - Downpayment) x flat mortgage interest rate / 12 = average monthly payment
Expenses that unavoidable such as utilities, home or condo association fee, property tax and home insurace, must be added on top of the mortgage payment ---> BC
Other factors that might be a deal breaker are:
- how far the commute from work or daily necessities (groceries, children healthcare, etc) to the rental home or to the bought home.
With gas price at this high in overall major cities, commuting time has become a major decision factor in buying house
- maintenance cost related to the condition and the age of the house. The older the house the more little unexpected things may happen and lead to higher maintenance cost such as wiring, plumbing, roofing, airconditioning / heating, and so on. However, if you score a foreclosed home or a short-sale house at lower than market value, it may cost you too to repair some damages left by the unhappy previous owners/ renters. This is another big dent to your wallet.
Now, we can compare the number derived from above calculation to this Renting Cost :
Rental Price + Security Deposit = RC
Expenses that related to renting is much less than buying a house or a condo / apartment. Usually heating , trash and garbage disposal, parking and water is already included. There is no association fee and no property tax to pay as the major advantage.
Simply, we now can compare BC and RC on month-to-month basis or yearly basis.
In a healthy economy where the housing price tends to go up, buyers are inclined to buy rather than rent because buyer can build equity.
In a trendless or declining economy, where jobs are uncertain and scarce, coupled by declining housing price, buyer prefers to become renter except in metropolitan areas where rental price keeps skyrocketing due to surplus demand.
In this case, one would be better off renting and saving more cash to pay larger chunk on the down payment when he / she decides to buy
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