Conflicted about housing: Buy or keep renting?

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Topic Author
ZeSrowAway
Posts: 2
Joined: Sat Jun 16, 2018 3:20 pm

Conflicted about housing: Buy or keep renting?

Post by ZeSrowAway » Sun Apr 14, 2019 4:21 pm

Hi everyone,

About a year ago, we moved to a new city for my job. Sold our small condo in coastal California city A, and moved to city B (still California). This was to correct the trajectory of my career, which was going toward a dead end. My plan is/was to give it max 5 years, and go back to city A: That’s where we have family and friends, and where we want to be in, long term. I absolutely love my new job in city B and everything about it is almost perfect, but are not big fans of city B.

Question: Is it logical to keep renting until we leave city B?

City A is a hub for my field (B is not) and I can probably find another job there eventually (almost certainly not as good as the one I have now. I'm ok with that possibility), but who knows. The economy may collapse tomorrow and I may not be able to find a job there for the next 10 years. My new company provides reimbursements up to 2% of the closing costs, which expires this summer (assume ~$10k before taxes, the reimbursements are taxable income). The area we are renting now doesn’t have good schools, but is great for our commutes and we are ok living here. We don’t want to (and have been advised not to) buy in this area, and places we want to buy in are significantly more expensive (duh!) and will increase our monthly expenses. The main reason we decided to sit out was that if all goes as planned, we shouldn’t live here for more than 5 years and all the calculators I have seen online suggest we should live here for at least 3 years (even in a booming market) to make buying beneficial. I'll start looking in city A after 2 years.

On the other hand, not buying takes away a deduction on our taxes and a small amount of saving in the form of principal payments (we are maxing out 401ks/HSAs/FSAs and ROTH if income allows us), in addition to losing on any possible market gains (recognizing that it can just as easily go south). Oh, and then there’s the rising interest rates, etc. We have a 2 year old son and my worry is by the time schools really matter, we may still be in city B (in ~3 years), and then decide to buy here. If prices/rates are higher then, we'll lose. If lower, I'm not sure if we gain (considering our longer term plans).

So in short, we don’t think we should buy, but get some funny looks from people when we tell them that! What's the worst case scenario if we buy? Long distance rental?

Carefreeap
Posts: 2521
Joined: Tue Jan 13, 2015 7:36 pm
Location: SF Bay Area

Re: Conflicted about housing: Buy or keep renting?

Post by Carefreeap » Sun Apr 14, 2019 6:00 pm

I wouldn't buy unless I planned on owning a property for 10 years or more. Between market corrections and transaction costs there is a high risk you can lose your principle. Even in the red-hot Bay Area we saw about a 20%-25% decline in property values in my town from 2008-2012.

chessknt
Posts: 138
Joined: Wed Jul 13, 2016 3:15 am

Re: Conflicted about housing: Buy or keep renting?

Post by chessknt » Sun Apr 14, 2019 6:05 pm

I have bought and sold houses when living there approx 4 years. Best case scenario I break even, worst case I lose maybe 3-5% so far unless there is a major swing in housing prices. I knew this going in and accepted the loss in exchange for access to housing I wanted to live in since the rental market had abysmal quality and was overpriced (5-8x their mortgage, taxes not that high). This made buying better also since even with a 3% loss the annual cost was only a few thousand when compared to renting.

Trader Joe
Posts: 600
Joined: Fri Apr 25, 2014 6:38 pm

Re: Conflicted about housing: Buy or keep renting?

Post by Trader Joe » Sun Apr 14, 2019 6:14 pm

ZeSrowAway wrote:
Sun Apr 14, 2019 4:21 pm
Hi everyone,

About a year ago, we moved to a new city for my job. Sold our small condo in coastal California city A, and moved to city B (still California). This was to correct the trajectory of my career, which was going toward a dead end. My plan is/was to give it max 5 years, and go back to city A: That’s where we have family and friends, and where we want to be in, long term. I absolutely love my new job in city B and everything about it is almost perfect, but are not big fans of city B.

Question: Is it logical to keep renting until we leave city B?

City A is a hub for my field (B is not) and I can probably find another job there eventually (almost certainly not as good as the one I have now. I'm ok with that possibility), but who knows. The economy may collapse tomorrow and I may not be able to find a job there for the next 10 years. My new company provides reimbursements up to 2% of the closing costs, which expires this summer (assume ~$10k before taxes, the reimbursements are taxable income). The area we are renting now doesn’t have good schools, but is great for our commutes and we are ok living here. We don’t want to (and have been advised not to) buy in this area, and places we want to buy in are significantly more expensive (duh!) and will increase our monthly expenses. The main reason we decided to sit out was that if all goes as planned, we shouldn’t live here for more than 5 years and all the calculators I have seen online suggest we should live here for at least 3 years (even in a booming market) to make buying beneficial. I'll start looking in city A after 2 years.

On the other hand, not buying takes away a deduction on our taxes and a small amount of saving in the form of principal payments (we are maxing out 401ks/HSAs/FSAs and ROTH if income allows us), in addition to losing on any possible market gains (recognizing that it can just as easily go south). Oh, and then there’s the rising interest rates, etc. We have a 2 year old son and my worry is by the time schools really matter, we may still be in city B (in ~3 years), and then decide to buy here. If prices/rates are higher then, we'll lose. If lower, I'm not sure if we gain (considering our longer term plans).

So in short, we don’t think we should buy, but get some funny looks from people when we tell them that! What's the worst case scenario if we buy? Long distance rental?
Keep renting.

JoeRetire
Posts: 2137
Joined: Tue Jan 16, 2018 2:44 pm

Re: Conflicted about housing: Buy or keep renting?

Post by JoeRetire » Sun Apr 14, 2019 6:51 pm

ZeSrowAway wrote:
Sun Apr 14, 2019 4:21 pm
About a year ago, we moved to a new city for my job.

My plan is/was to give it max 5 years, and go back to city A

Question: Is it logical to keep renting until we leave city B?
If you are confident of your plan, I would keep renting.

I would never purchase a house for just a 4 year duration.

3funder
Posts: 950
Joined: Sun Oct 15, 2017 9:35 pm

Re: Conflicted about housing: Buy or keep renting?

Post by 3funder » Mon Apr 15, 2019 6:08 am

JoeRetire wrote:
Sun Apr 14, 2019 6:51 pm
ZeSrowAway wrote:
Sun Apr 14, 2019 4:21 pm
About a year ago, we moved to a new city for my job.

My plan is/was to give it max 5 years, and go back to city A

Question: Is it logical to keep renting until we leave city B?
If you are confident of your plan, I would keep renting.

I would never purchase a house for just a 4 year duration.
+1

Dottie57
Posts: 5740
Joined: Thu May 19, 2016 5:43 pm

Re: Conflicted about housing: Buy or keep renting?

Post by Dottie57 » Mon Apr 15, 2019 12:05 pm

3funder wrote:
Mon Apr 15, 2019 6:08 am
JoeRetire wrote:
Sun Apr 14, 2019 6:51 pm
ZeSrowAway wrote:
Sun Apr 14, 2019 4:21 pm
About a year ago, we moved to a new city for my job.

My plan is/was to give it max 5 years, and go back to city A

Question: Is it logical to keep renting until we leave city B?
If you are confident of your plan, I would keep renting.

I would never purchase a house for just a 4 year duration.
+1
Another +1

Remember the tax deduction is only on interest and at your marginal tax rate percentage.

Trader Joe
Posts: 600
Joined: Fri Apr 25, 2014 6:38 pm

Re: Conflicted about housing: Buy or keep renting?

Post by Trader Joe » Mon Apr 15, 2019 12:26 pm

ZeSrowAway wrote:
Sun Apr 14, 2019 4:21 pm
Hi everyone,

About a year ago, we moved to a new city for my job. Sold our small condo in coastal California city A, and moved to city B (still California). This was to correct the trajectory of my career, which was going toward a dead end. My plan is/was to give it max 5 years, and go back to city A: That’s where we have family and friends, and where we want to be in, long term. I absolutely love my new job in city B and everything about it is almost perfect, but are not big fans of city B.

Question: Is it logical to keep renting until we leave city B?

City A is a hub for my field (B is not) and I can probably find another job there eventually (almost certainly not as good as the one I have now. I'm ok with that possibility), but who knows. The economy may collapse tomorrow and I may not be able to find a job there for the next 10 years. My new company provides reimbursements up to 2% of the closing costs, which expires this summer (assume ~$10k before taxes, the reimbursements are taxable income). The area we are renting now doesn’t have good schools, but is great for our commutes and we are ok living here. We don’t want to (and have been advised not to) buy in this area, and places we want to buy in are significantly more expensive (duh!) and will increase our monthly expenses. The main reason we decided to sit out was that if all goes as planned, we shouldn’t live here for more than 5 years and all the calculators I have seen online suggest we should live here for at least 3 years (even in a booming market) to make buying beneficial. I'll start looking in city A after 2 years.

On the other hand, not buying takes away a deduction on our taxes and a small amount of saving in the form of principal payments (we are maxing out 401ks/HSAs/FSAs and ROTH if income allows us), in addition to losing on any possible market gains (recognizing that it can just as easily go south). Oh, and then there’s the rising interest rates, etc. We have a 2 year old son and my worry is by the time schools really matter, we may still be in city B (in ~3 years), and then decide to buy here. If prices/rates are higher then, we'll lose. If lower, I'm not sure if we gain (considering our longer term plans).

So in short, we don’t think we should buy, but get some funny looks from people when we tell them that! What's the worst case scenario if we buy? Long distance rental?
Keep renting.

sschoe2
Posts: 335
Joined: Fri Feb 24, 2017 4:42 pm

Re: Conflicted about housing: Buy or keep renting?

Post by sschoe2 » Mon Apr 15, 2019 12:34 pm

renting especially if you don't like city B. OTOH I hate Illinois but am stuck there for a long time for a good job so I bought. The break even point in most markets is about 7-10 years.

User avatar
FIREchief
Posts: 2816
Joined: Fri Aug 19, 2016 6:40 pm

Re: Conflicted about housing: Buy or keep renting?

Post by FIREchief » Mon Apr 15, 2019 3:06 pm

Carefreeap wrote:
Sun Apr 14, 2019 6:00 pm
I wouldn't buy unless I planned on owning a property for 10 years or more. Between market corrections and transaction costs there is a high risk you can lose your principle. Even in the red-hot Bay Area we saw about a 20%-25% decline in property values in my town from 2008-2012.
+1 I would never buy unless I planned to stay in the house for 10+ years. Even then, I don't like home ownership. If you're renting and don't like the schools/neighbors/etc. you can easily move. Not so easy if you own a house.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

Topic Author
ZeSrowAway
Posts: 2
Joined: Sat Jun 16, 2018 3:20 pm

Re: Conflicted about housing: Buy or keep renting?

Post by ZeSrowAway » Wed Apr 17, 2019 12:25 am

Thank you all for your inputs. Seems we should stick to our plans for now.
chessknt wrote:
Sun Apr 14, 2019 6:05 pm
... accepted the loss in exchange for access to housing I wanted to live in since the rental market had abysmal quality and was overpriced (5-8x their mortgage, taxes not that high)...
Thanks for verbalizing what I meant better! Yes, buying in some areas seems to be the only option to get access (for a reasonable price).
Dottie57 wrote: Remember the tax deduction is only on interest and at your marginal tax rate percentage.
+1 Thanks

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