Rent vs Buy. The age old dilemma!

[jr1029]

I'm trying to decide if I want to buy a house / condo

I currently live in a hot-market HCOL and rent a 2 bed for $1500/month. This is probably about $600/month under market. I really really like my neighborhood. The rental is a bit run down but totally adequate. I have a month to month lease. I can't buy in my fancypants walkable immediate neighborhood - super expensive.  (my place if it were upgraded would go for $550k minimum).

Small houses/condos of a similar size to my rental in another area equidistant from work but much less fancy and walkable are around $380-$420k. The schools there aren't as good but I have no kids.

Financial basics: Single no kids early 40s
No debt
Gross income about $110k
About $70 for downpayment (retirement accounts are separate)
Currently saving about 35% of my income. Yeah, I take a lot of fancy vacations.

So... I can afford to buy, but struggling to decide if it makes sense. I have no problem whatsoever with being a renter, but I worry about when I have to move (landlord sells or whatever) and being priced out if prices keep going up. I already wish I'd bought 5 years ago when things here were much less crazy.

In my situation, would you buy ASAP to guarantee affordable housing in the future, or stay in the fairly-sweet rental deal as long as possible? Would love some Mustachian advice..... thanks!!

[FIREySkyline]

I think what you're missing when you tackle it from the "being priced out of the market" angle is that, right now, you can just take the money you're saving and invest it and over the long-haul your money will likely multiply much more in investments than it will in the house -- meaning you're investing yourself into a better position regardless of the market.

Example: House right now is $550k, $550k in an index fund at ~7% gain per year = $771k after 5 years, $1.08M after 10 years. You think it'll go up that much in 5 or 10 respectively? If not, your only concern should be based on where and how you want to live long term while recognizing that buying is unlikely to be more cost effective.

[Cwadda]

Definitely continue to rent.  I'd even ask the landlord to sign you a new 1 year lease for the same price. You are getting a steal and will make much more, much faster if you invest the difference.

Also in your shoes I'd still rent for $2100/month.

I'd continue to rent until the stock market stops performing so well and house prices cool off.  I see no reason to buy a house when everything is going $50k over asking.  That is simply ridiculous to me.

[CrispKale]

A house purchase doesn't start to pay for itself until years and years later. As you've stated you have enough to buy but don't mind renting, I'd continue to grow your stache while taking advantage of the rental deal until the rental deal no longer exists. Who knows if you will find a partner and want to move, retire early to a tropical island, change jobs, want to travel even more, etc. When the time for a decision comes the more options available to you the better in my opinion. 

[BuffaloStache]

+1 vote for rent now and continue to build the 'stache. If you aren't dying to get into a home, then I'd wait it out and invest what would go into the home for now.

[nereo]

Stay in your sweet rental as long as it is a sweet deal.
From a financial perspective this is obviously the optimal choice.