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marcus
2010 Oct 13, 12:11am
if you’re paying $2k/month to rent the same house then after 5 years of waiting you’re out 120K. I doubt you’ll find houses 120K cheaper in 5 years!
A thirty year mortgage would not pay down 120K. I'm sure you know that, and just using sloppy thinking. But it's true, the pay down would be significant. Maybe 35K. Some of the mortgage calculators have the option of showing the amortization.
The thing is, what if rates are significantly higher, because of inflation and inflation expectations. Then someone can get in at a lower price, with a chance to lower their cost even more (effectively) when rates come down.
marcus
2010 Oct 13, 12:20am
Oh, and one other thing. What if the kind of place you are paying $2000 to rent, can't be found for price that has a mortgage payment near that ? It depends on the market. There was a time when a place with a rent of 2k could be bought for a mortgage payment of well under that. But that was before everyone thought real estate was an investment/ inflation hedge, that's sure to go up up up.
you can now get a 30yr mortgage at 3.875% for 0 points
https://www.google.com/comparisonads/mortgages?s=1&kw=interest%20rates&cat=2&ca_fam&schema=refinance&q=interest%20rates#ti=7
While Patrick's argument that house prices will fall as interest rates go up is debatable, I suspect the worse case scenario is a wash, where your cost of renting until this may happen will cancel out any price drops. e.g. if you're paying $2k/month to rent the same house then after 5 years of waiting you're out 120K. I doubt you'll find houses 120K cheaper in 5 years!
#housing