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I couldn't find exact modern numbers on rent increase rates, so I have to wonder how accurate the default of 3% on that calculator is. My rent increased between

by pstack 15y ago

I couldn't find exact modern numbers on rent increase rates, so I have to wonder how accurate the default of 3% on that calculator is. My rent increased between five and ten percent every year the five years prior to buying my home. Therefore, my home purchase (per the calculator) comes out as the better solution in only four years. Also, buying last year had the added bonus of an $8,000 tax credit. Not a discount on your income, but an actual dollar for dollar credit (ie, come tax time, I add $8,000 to the refund amount). That's seven months of rent at my prior place. Not a bad deal. Thanks to the deductions from paying my mortgage (versus no tax deduction that I'd have gotten with renting), I saved just enough money on qualified income to fall under the first time home buyer credit limit. Worked out well. Anyway, it definitely depends on where you live. Circumstances change drastically, even within a state. Even just outside of a main metro area. San Jose is cheaper than San Francisco. Beaverton is cheaper than downtown Portland. Westminster is cheaper than Denver. In some places, owning will simply never be an option. I couldn't afford a million bucks for a 900sqft home in San Francisco. Hell, I could probably barely afford rent. Based on my personal experience, I would advise people to buy sooner than later. That is, I personally wish I'd have bought five or ten years earlier. On the other hand, I think I was also wise to wait until just the right time in my life and the market to buy and I think that's a wise path to take, too. You may be putting off the benefits of a home if you delay, but at least you're not making any commitments by paying rent, either. In the long run, I think that is the mistake too many people make. They feel the ticking clock and buy because everyone else says that's what adults do. That leads to buying too much and extending yourself and your credit too far. I know home-ownership is "the American dream", but I think it's a dream that you have to let come to you, when the time is right for you.

presto8 15y ago
My rent increased between five and ten percent every year the five years prior to buying my home. Please check my math: using your numbers and averaging to 7.5 percent per year, that would be a cumulative increase of (1.075)^5 = 1.44 = 44 percent increase. Did your rent really go up 44 percent over 5 years? Where do you live? As an additional data point, I rented a house with some friends in Beaverton for 5 years and the landlord never raised the rent.
- pstack 15y ago
  Close. I think you counted an extra year in there. It increased 5% at the end of the first year, 7% the second, then 10% the third and fourth. I moved out at the end of my lease after the fifth year, so I don't know what the fifth increase going into the sixth year would have been. It started at $900 and five years later, it was $1,215. That's a 35% increase. I lived in a more expensive apartment than is typical, but there is no housing anywhere near where I am (only apartments). I don't know if proportional increases are typical all over Denver, though. By the end of the fifth year, I was tired of seeing my rent increase at triple the rate of my raises.
  - presto8 15y ago
    Thanks for sharing the interesting historical data! It does sound like buying may be the optimal choice in your real estate market, especially if you are planning on staying put for a long time. I do think for the near future, rent will continue to rise as more people decide to sit out of the real estate market (waiting for more price drops to occur). Ultimately even this should correct itself as people start buying houses again since they will grow tired of increasing prices and decreasing availability of apartments.

by pstack 15y ago

presto8 15y ago

My rent increased between five and ten percent every year the five years prior to buying my home. Please check my math: using your numbers and averaging to 7.5 percent per year, that would be a cumulative increase of (1.075)^5 = 1.44 = 44 percent increase. Did your rent really go up 44 percent over 5 years? Where do you live? As an additional data point, I rented a house with some friends in Beaverton for 5 years and the landlord never raised the rent.

pstack 15y ago
Close. I think you counted an extra year in there. It increased 5% at the end of the first year, 7% the second, then 10% the third and fourth. I moved out at the end of my lease after the fifth year, so I don't know what the fifth increase going into the sixth year would have been. It started at $900 and five years later, it was $1,215. That's a 35% increase. I lived in a more expensive apartment than is typical, but there is no housing anywhere near where I am (only apartments). I don't know if proportional increases are typical all over Denver, though. By the end of the fifth year, I was tired of seeing my rent increase at triple the rate of my raises.
- presto8 15y ago
  Thanks for sharing the interesting historical data! It does sound like buying may be the optimal choice in your real estate market, especially if you are planning on staying put for a long time. I do think for the near future, rent will continue to rise as more people decide to sit out of the real estate market (waiting for more price drops to occur). Ultimately even this should correct itself as people start buying houses again since they will grow tired of increasing prices and decreasing availability of apartments.