I intend to move within 5 years or so. Is it a good idea nevertheless to  buy a house in cleveland?

IMO it's not a good idea to buy a house anywhere if you intend to move within 5 years.

I intend to move within 5 years or so. Is it a good idea nevertheless to buy a house in cleveland?

 

It might make sense if you buy a place that has a property tax abatement and you have enough down payment cash on hand to avoid a PMI.  Otherwise probably not because rent is relatively cheap around here.

 

You'll find plenty of new builds and renovations with tax abatements usually ranging from 7-15 yrs. 

 

The other option would be to check out some options of foreclosed homes and hope you hit gold when the market rebounds.  However, I would not recommend that for someone who is not intimately familiar with the area.

The mister and I ran the math when we were buying our place, and we came up with that if we stayed in our house for exactly 5 years, we would've paid in total the same amount we would have for rent for 5 years (including closing costs, downpayment, and what not) with the added bonuses of having built our credit and not having to deal with a landlord.  That was assuming that the house neither appreciated nor depreciated.  If you know for sure that you're definitely going to be in the house less than 5 years, then you may end up paying more than if you just rented in the first place.

Are you sure about the numbers you ran?

 

I did some math and it was no where even close to 5 years. Lets say you buy a house for 2K and put down 50K for down payment with a mortgage of 150K. I think it takes almost 10 years before you start building any equity.

Are you sure about the numbers you ran?

 

I did some math and it was no where even close to 5 years. Lets say you buy a house for 2K and put down 50K for down payment with a mortgage of 150K. I think it takes almost 10 years before you start building any equity.

 

It was about a year and a half ago based on the exact loan payments of our house - I ran them several times, but I guess I should've mentioned that we have a super low interest rate as well as the tax abatement.  Please note that I also said after 5 years, it would have been equivalent (in terms of net flux of $$) to renting for the past 5 years, so no, you may not be building equity yet, but you wouldn't be worse off than if you'd just rented the whole time.

Are you sure about the numbers you ran?

 

I did some math and it was no where even close to 5 years. Lets say you buy a house for 2K and put down 50K for down payment with a mortgage of 150K. I think it takes almost 10 years before you start building any equity.

 

You start building equity in year one.  However, on a 30-year mortgage, in year one, only about 17% of your debt service goes towards principal and the rest on interest.  In year five, about 22% goes to principal.  So on a $100k house with a 5.95% loan, you should have around $5,700 in equity from about $29k in payments built up after year five.  It isn't until year nineteen in an 30-year amortization schedule that interest and principal are 50/50.

 

You can compare that against your rent for five years and see what that gives you.  But don't forget closing costs, property taxes (2.02% of market value annually, unless you have an abatement on the structure), and water and sewer bills, which you wouldn't necessarily have to pay directly if you were renting.  And then there's the cost of things breaking down and home and yard maintenance.  Then when you sell, there are commissions and other costs.

 

Docbroc has some great points on the intangibles on homeownership.

Also don't forget, though, that both the property taxes and mortgage interest are tax deductible.