- MetroNational Office Building in Memorial City Tops Out, Slated To Open in Early 2017 [HBJ]
- How Houston’s Vast Jurisdiction Leaves Its Fringe Suburbs in Limbo [Houston Chronicle]
- Houston May Be on the Brink of Recession, According to Federal Reserve Bank of Dallas Report [UPI]
- Heights Restaurant Zelko Bistro Has Permanently Closed Following Appearance of Lease Sign [Culturemap; previously on Swamplot]
- What Does the YIMBY Movement Want, Exactly? [The Urban Edge]
- What Houston Looked Like Before and After Densification Reforms Were Adopted in 1999 [City Observatory]
- Houston Homeowners Take 1 Year, 5 Months on Average To Break Even on Their Purchase, Finds Zillow [HBJ]
- Slideshow: The Winners of the Houston Apartment Association Honors Awards [Houston Chronicle]
Photo: Russell Hancock via Swamplot Flickr Pool
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I’ve read and re-read the Zillow article and I still don’t understand what Break Even on Rent vs. Buy even mean. Break even how? It takes many years to recoup the closing costs, selling costs (when it comes time to sell), and maintenance.
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I also would like to point out that in the higher prices it’s much cheaper to rent vs. buy. You can buy a $600k house for about $4,500 a month all in, but you can rent the same house for $3,500. You can buy a $3Mln house for about $20k a month all in, but you can rent it for less than $10k a month.
@commonsense: In my calculations, 4 to 5 years might be more typical for breaking even as well. Very rarely does a buying vs renting comparison comparing identical properties. Everyone shoud always try their best to estimate whether buying or renting makes sense for them, and not make decisions based on bulk trends like this.
http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html?_r=0
To Commonsense
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A few weeks back you referenced (or referred to) a more streamlined real estate transaction process. Do you recall this? I tried looking for you comment and couldn’t find it. Thx.
Re: Houston May Be on the Brink of Recession, According to Federal Reserve Bank of Dallas Report
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Lol, well Dallas would surely love that to happen. Dallas has always wished for Houston”s demise; hoping to someday outdo it. Pitiful desperate Dallas is now using its friends at the fed to try to spook Houston. Don’t believe Dallas’ Houston hating hype. Dallas hates Houston, but all that’s gotten them over the years is a fall to 3rd-largest in Texas, and a slip to 9th-largest in America. Meanwhile, Houston is second in growth only to NY, and projected to become America’s 3rd-largest, after NY, LA. That’s what Dallas is sooooooo jealous of…always has been, always will be: sorry Dallas.
Re the Houston ETJ, the article says, “But others [people living in unincorporated subdivisions and master-planned communities] want to be part of a city. Meyers says his constituents are particularly concerned about services such as building code enforcement, fire protection and public safety.”
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If they want city services, they should have moved to the city. Problem is people want it all. Life is full of compromises. You value the big yard and culs-de-sac and mostly white schools, you move to Katyville or Cy-Fairland at the expense of some of the services being in a city gets you. You value city services and a short commute and hip indy stores over brand new construction and quiet streets and segregated schools, you move to an urban neighborhood.
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As Cody (and where IS Cody, BTW? Haven’t heard from him in dog’s years…) and others are fond of pointing out, there is plenty of affordable real estate left inside the loop, but you might have to compromise on square footage or building age, or — gasp — live within sight of people of a different socioeconomic stratum who don’t look like you.
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FWIW, on my walk around the neighborhood this morning, I passed tons of “For Lease” signs in front of bungalows, duplexes, and quadplexes. It must be summer, and all the college kids have gone home.
@Limestone, uhmmmmm, I think I was talking about real estate records being put into a Blockchain type database (like BitCoin transactions) whereas ownership is clear and indisputable and transfers are easy and don’t require much effort or legal costs, plus all transactions are recorded in perpetuity. I forgot where I read about it but it was proposed to be implemented in developing countries, namely central america where land ownership is not very clear and records sometimes are contradictory. I don’t see any reason why we can’t do it here as well.
Rent vs Buy metrics are a salve for short-term thinking. Throwing away $ on rent instead of (sorry) slowly-building equity in the long run is the definition of waste. That being said, when I was younger, buying was not an option nor any option without me moving to where housing was affordable. I never expected nor was told by any politician at the time to expect taxpayers and public debt to fund “affordability” – whatever that term means.
@Honest Truth You said it!! Dallas sucks!!! Our FRB branch, its yuge! …really so much better. It won’t even waste time on a regional report pointing out, maybe, how sorry Dallas is… Suck it big D.
The whole rent vs buy makes no sense. You’d have to be dumb as a box of rocks to not see that buying is the long term best way to keep money in your pocket.
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My mortgage is fixed. 30 years. your rent is fixed for 18 months. Then they raise prices on you. Every 18 months. Then the apartment decides to evict you cause this is Texas and damnit, they can do that if they want. So now you have to find somewhere else to live, moving expenses. Rent goes up again. Maybe you get into a 3 year deal? Probably not. Your rent keeps on going up. 10 years ago $800 was a pretty decent apartment. Today, that $800 doesn’t even get you a place with a washer dryer in the apartment.
Re: Houston recession and the childish rants about Dallas
Ask any high end retailer about sales and you’d know we started a dramatic sales slump last year. It’s the oil economy stupid!
@ toasty & vegemite: Anybody that is subject to a great deal of short-term uncertainty regarding their location or income should think very carefully about whether to buy a home instead of renting. You might think about a spouse’s location, too, or about how likely you are to get married if you’re not, or about health issues with your parents, or other factors. You should also give some consideration to the principle that bad things tend to correlate with other bad things; if you lose your job in the energy industry in Houston, then its likely happening to other people, you may be challenged financially, and you may not be able to sell quickly or for as much money. Also, renting can enable you to obtain housing that is exactly as large as you want it to be; if you’re single or a couple without kids, then a new 1-bedroom apartment is less expensive than a new 3-bedroom house; and its very hard to find a small house to buy. Upkeep and HVAC on the smaller space is also less expensive.
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I always come up with the same results as Commonsense on this, that 4-5 years is a minimum for breaking even. Minimum. If you can pull that off then great. If you aren’t confident then you shouldn’t be buying.
commonsense you’ve just described MERS, welcome to 1997.
People are in general insanely bad with money. Same thing goes for the “buy vs rent” thing. It’s such a complex financial instrument and people always boil it down to “but you’re building equity!” (or whatever the equivalent platitude for renters is). Ok, sure you are, but at what rate? And how much did you put down up front? What is your full payment going to be after escrow (kind of a big deal in Houston)? And what is the time value of money when you consider a front loaded down payment? And what’s the value of the risk you take on owning a house (maintenance and “I need to move for work”)?
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The only way to know whether or not buying a house is a good investment is to put a lot of thought into it and do the math that exists yourself. It’s not particularly difficult, learn about time value of money and things like P/F, F/P, A/P, etc, and then use those to perform an NPV as best you can. It’s a simple financial tool for making decisions like this.
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And when its all said and done it’s worth recognizing that there are non quantitative issues that may be involved. Heck, I bought a house because I wanted cats.
@toasty – I resent the “box of rocks” comment. Some could argue the opposite is true.
You only build equity when certain conditions are met. For example, you need indefinitely-rising property values to guarantee a gain that overcomes your annual taxes and interest on your mortgage. This does not always happen. There is no guaranty that your house will also be worth more than your mortgage – many people have been burned by this in other regions (like Las Vegas and Florida). There is actually a high chance that home values in Houston will soon decrease across the board as we enter recession based on the oil bust.
If you do jump in and buy a home, you will continuously squander cash on things that do not necessarily increase your home’s value – like a replacement water heater, a new roof, tree removal, weekly mowing, annual association dues, property taxes, higher utility usage compared to an apartment, et al. Add those up over the life of your home ownership and deduct that from the “equity” you built. You will see that you quickly wash out and barely break even. You could have taken the difference between that and your apartment rent, invested it, and end up with more wealth than if you had owned a home.
I’d agree with the comments by Superdave, MrEction, and The Niche: basically, owning a home is a complex decision that deals with a lot of moving parts. Some are quantitative and some are qualitative. Each person has to put a “price” on the qualitative factors and then mesh it with the pure financial costs.
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Many people forget to plan for things needing to be replaced (water heater, appliances, A/C maintenance, carpet) that they take for granted that the landlord will take care of when they rent. Owning does ensure a longer guarantee of the monthly payment than renting, though, which is my main beef with renting.
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So, I split the difference and bought a smaller property. Enough space for what I need, steady payments, and I reserve for the maintenance items since it is just a matter of time. Bottom line: each has its merits but each person has to decide for themselves after carefully considering the factors.