Got back from a nice weekend visiting the BIL. Spent way to much money but that's the way of it. Guess we're eating in for a few weeks to work off the overspending of eating out every meal. But the kids were glad to see him and his girlfriend and his cats. Which after they went to a "cat cafe" we realized both my kids have cat allergies and now the chances of having a cat ever is negative zero. DH has severe cat allergies and the kids kept begging asking him to take shots. No way. But now it's like laughable. I'm the only person not allergic and i am not interested in another pet.
That being said my BIL bought 2 years ago his condo in the midst of Covid. 2 bd/2ba he bought for $780k. It's a nice place and I'm glad he bought something finally. He has no kids and isn't married and bought it solo. And I'm not sure if he's marrying the girlfriend (although she doesn't know this and a story for another day about not watching your money). But last month he had a special HOA assessement of $10k for the roof repairs and $11k for a new HVAC unit. So he was talking about how he's irritated with a condo and thinks SFH are better.
Anyway he's always checked in with us for advice. DH's parents aren't here and well they wouldn't be useful anyway not knowing how it works in the US taxes, buying, selling. So we were just chit chatting and I pointed out that his interest rate is like 3.5%. And he's paying like $4500 for his condo a month. Sounds ridiculous but he was renting for $3500 for a 1 bd apartment so it's a wash. He's got a bigger place for $1k more but that's close to what he's paying in principal. So he's basically renting his place for $3500/month with interest, property taxes, HOA.
But now the idea of moving to a SFH is tempting. But at what cost? The rate he could get would be 6.75% and it would be more expensive. How much? Well let's use $1.2M so a $900k mortgage for $5837 mortgage payment versus $2802 a month currently. Is the SFH worth doubling his payments? The answer to him was very obviously no.
So his GF was talking about having kids, needing a bigger place, moving, waiting until they can find something. But not realizing that the reality is that it's a lot more expensive right now to move up. That the low interest rate is a double edged sword that buying right now is not necessarily in favor of buying. Right now renting a SFH might be the smarter move.
Right now many owners are golden handcuffed to their houses, not wanting to lose their interest rate. I know I am. I definitely would love to move and have considerered it a lot. But we couldn't afford a $900k mortgage right now at current rates. So we couldn't afford our current home. That $5837 doesn't include property taxes and insurance.
So we as well as my BIL are golden handcuffed to our house. We couldn't rent anywhere as cheap as we are paying either. When we moved in our rent was borderline with our mortgage. But now renting is ~62.5% more expensive than when we moved in. The house across the street is a rental and the owner moved like 3 houses down and we know them well. When we moved in it was renting for $4000 in 2017. It's now renting for $6500 a month in 2023. So our mortgage is less than both currently.
So moving is out of the question. We couldn't even rent a bigger place. In times of high inflation this is probably a normal scenario. Once you lock in your fixed costs with buying the longer you stay put the better deal it becomes. A lot of people say renting is better and it can be.
But where renters fail? Do they actually save the difference between the rent and mortgage and invest it? And what happens when rent surpasses mortgage payment over time? Or do renters assume they will always be below market rent?
Have you noticed the mortgage rate affecting people's decisions? I find it interesting how much it impacts the decision of renting and buying.
July 26th, 2023 at 11:03 am 1690369380
July 26th, 2023 at 12:23 pm 1690374207
July 26th, 2023 at 06:28 pm 1690396094
I think house prices move to match up to the interest rates.
If you plan to stay in an area, I think it always makes sense to buy if you can afford to. If you plan to move a lot, you should rent,
A well maintained paid off house at retirement is a great asset.
July 26th, 2023 at 08:38 pm 1690403909
*Well-maintained*--there's the rub. Some of us should never really be homeowners. My parents, especially my dad, were clueless about home maintenance, and my mom never even let me do so much as change a light bulb when I was growing up. (But I did do most of the house cleaning, but no maintenance.) I bought my house 18 years ago when I was 45 and I still have never put anything up on the walls except for where the previous owner left a couple of nails. I have a contract for my home heating system and get the furnace cleaned and inspected almost every year, and I've been religious about hiring someone to inspect the roof and re-coat it when need it, and I've hired a plumber and an electrician over the years...but that's it. I am terrified when anything goes wrong and plan to move within a year or two after I retire. I will have the house paid off in 6 more years or less, so the paid-for part will be done, but it's going to end up being one of those sales where I won't get anywhere near the value I could because I am unable/unwilling to do the work involved. My kitchen and bathroom were probably last done in the 1970s. Maybe I will get a light refresh done on them, but that's about it.
July 27th, 2023 at 11:28 am 1690457295
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