You are onto something. Watch the monthly payment and the monthly rent. I was in the Navy, so I have rented from sea to shining sea over a long period of time. My experience showed me that in a bubbly market (California), rents were always cheaper. However, in areas that were not moving one way or the other (Maine, NW Florida, NE Florida, S. Texas, N. Texas, and Hawaii in the mid-90s, rents were usually more expensive than PITI.
Why?
My theory was renting has fewer risks and lower transaction costs. The only reason you would ever buy (from a financial perspective) was to cash in on appreciation or to stay in the house a loooooong time.
When to buy? When rents are at a slight premium to PITI. Buy when PITI is no more than 1/4 of your income. Buy when price is 2-3X appropriate income. Buy when everyone thinks you are a moron if you do (not now, BTW).
You are onto something. Watch the monthly payment and the monthly rent. I was in the Navy, so I have rented from sea to shining sea over a long period of time. My experience showed me that in a bubbly market (California), rents were always cheaper. However, in areas that were not moving one way or the other (Maine, NW Florida, NE Florida, S. Texas, N. Texas, and Hawaii in the mid-90s, rents were usually more expensive than rents.
Why?
My theory was renting has fewer risks and lower transaction costs. The only reason you would ever buy (from a financial perspective) was to cash in on appreciation or to stay in the house a loooooong time.
When to buy? When rents are at a slight premium to PITI. Buy when PITI is no more than 1/4 of your income. Buy when price is 2-3X appropriate income. Buy when everyone thinks you are a moron if you do (not now, BTW).
Thanks for that. Lately I've been trying to decide if PITI will go below rent. On one hand owning is generally seen as more desirable than renting. On the other hand renting is less risky and doesn't require saving up large sums of money (which nobody can seem to do these days). Then again, maybe owning isn't as desirable as I think and I've just been brainwashed by the NAR in the last few years. It would be cool to see a historical chart of median PITI vs. median rent.
My in-laws have come to understand the pains of owning in the last few years. My mother-in-law just told my wife a few months ago that owning a house is "overrated".
Comments
You are onto something. Watch the monthly payment and the monthly rent. I was in the Navy, so I have rented from sea to shining sea over a long period of time. My experience showed me that in a bubbly market (California), rents were always cheaper. However, in areas that were not moving one way or the other (Maine, NW Florida, NE Florida, S. Texas, N. Texas, and Hawaii in the mid-90s, rents were usually more expensive than PITI.
Why?
My theory was renting has fewer risks and lower transaction costs. The only reason you would ever buy (from a financial perspective) was to cash in on appreciation or to stay in the house a loooooong time.
When to buy? When rents are at a slight premium to PITI. Buy when PITI is no more than 1/4 of your income. Buy when price is 2-3X appropriate income. Buy when everyone thinks you are a moron if you do (not now, BTW).
Thanks for that. Lately I've been trying to decide if PITI will go below rent. On one hand owning is generally seen as more desirable than renting. On the other hand renting is less risky and doesn't require saving up large sums of money (which nobody can seem to do these days). Then again, maybe owning isn't as desirable as I think and I've just been brainwashed by the NAR in the last few years. It would be cool to see a historical chart of median PITI vs. median rent.
My in-laws have come to understand the pains of owning in the last few years. My mother-in-law just told my wife a few months ago that owning a house is "overrated".
-Joel