BCAccountant wrote: gobigorgohome wrote:
Not sure why renting has to include suffering and not sure what someone has wasted 5 years on if you rent instead of buy.
I think it has to do with the fact that the sooner you buy, the sooner you'll be mortgage free, and then the sooner you can retire/diversify your time with minimal monthly fixed costs.
If I had bought when I was 20, I would likely be mortgage free right now. In 10 years, I'll likely be glad I bought when I did (last year), as opposed to waiting an additional 5 years.
But that is not true in all markets, it is fairly simple to see what difference waiting 5 years would equate to financially. If the average house price is $550,000 and it goes down by 25% over 5 years, the same house could be purchased for $412,500. Using an interest rate of 5%, a downpayment of $30,000 and ignoring the possibility of a higher downpayment due to renting and waiting, I ran the numbers and the purchaser who waited could make $2525 monthly mortgage payments and have it paid off in 20 years. The purchaser who bought earlier would have to pay $3000 a month for 25 years. Even using $2000 a month in rent, you come out ahead by waiting. Now I realize that it could not drop 25% and/or interest rates could rise, but I think people underestimate the savings of waiting in a down market, it just depends on how much the market drops, at which we can only make guesses.
Agreed. While I wouldn't be totally surprised to see prices ticking up next year, I know that one should always assume the worst case scenario:
1) Be prepared to hold for 10-15 years.
2) Buy in an area with a good school catchment, safe environment, near transit and shopping
3) Preferably buy in an area thats totally new. That way, you know your neighbors didn't buy there 25 years ago for 1/10 the price, and won't have any qualms knocking 30-40% off their selling price when they do decide to sell.
4) Don't buy using more than 3X gross annual salary
I'm sure there are more ways that one could minimize risk, but you get the idea.
And regardless of what markets do, I know I'll have it paid off my place in 10-12 years from now and be able to live more or less mortgage free for the next 40+ years....