Is It Better To Buy Or Rent A Home In Hampton Roads?
As of February 2008 it may be a better idea to rent than buy a home in Hampton Roads. However, there are always exceptions, everyone’s situation is a bit different. Let’s use Chesapeake and Virginia Beach as an example. Additionally, let’s use a budget of $1000 per month.
In order to borrow money for a loan, you must qualify or be Pre Approved. In the current market condition (with a prediction of rising rates and declining home prices) it only makes since of this writing to use either a conventional/fixed rate loan or some blend of a 80-15-5 fixed, etc, or a conventional fixed rate loan. With that as a starting point, you will most likely need between 5-20% cash for a down payment and an additional 4% or so, to pay for closing cost/ pre-paids, etc for the loan. You will pay roughly pay $100 a month for insurances and roughly $140 for taxes in addition to the mortgage payment. Leaving us with $760, for a mortgage payment. With our $1000 a month budget our purchase price will be limited. We will only be able to purchase a home for about $125- $140,000. Talk to a CPA about all those fancy schemes the mortgage lending snakes are offering, where they tell you they can get you into a 300K home for 1K per month….It is a SCAM!!!!!! They ALL are!!! BEWARE!!!! If you sign up for one of those a few things may happen….You may find yourself with a $3oK month payment at year 15, or perhaps at year 5 your payments go from 1K to 3K per month for the year. Those guys have no conscious! Beware.
So armed with this info we now assume you have around $10,000 cash for a down payment and closing cost, and ability to pay 1K per month for the mortgage, taxes and your insurance. If not, renting may be the best bet this year.
What will you get in Chesapeake or Virginia Beach, VA for $140,000? At the time of this writing, according to the MLS (Multiple Listing Service) there are:
Virginia Beach, Attached (Condos, Townhomes, Etc.)
40 Current Listings.- with the exception of a few condos (which have an additional fee of $100-200 per mo) few are safe places to live.
Virginia Beach Detached (A house)
There currently are zero detached homes (excludes mobile) listed in MLS for VA Beach for 140K or less.
Chesapeake Attached (Condos, Townhomes, Etc.)
13 Listed Condos, townhomes, etc. Of those 13; 4 or 5 look to be in safer neighborhoods and are probably the safest best. Keep in mind, we have not factored in ANY upkeep and maintenance yet! How much will upkeep and maintenance cost me? From $0-140K easily depending on what breaks, gets eaten, spits, sputters, flakes, etc. A roof could easily cost you 10K, a HVAC full install at least 5K, plumbing nightmares….the sky’s the limit! Etc. Be prepared, insured, and make good friends with construction dudes!
Chesapeake Detached (A house)
Currently in Chesapeake, 27 detached homes are listed in MLS, most are as I’m sure you imagined in the ghetto or in a similar bad neighborhood. Look up the crime reports online. Many are 100 years old and show every day of their age. Nothing “Historical” about a money pit! So, in Conclusion, In the purchase department: A 1K a month mortgage payment on a 140K property in VA Beach will get you a Townhouse in the hood or a townhome in a declining neighborhood. The same amount in Chesapeake, VA will get you a Town House …you will have to look real hard to find a Town House that is in good shape and in a safe neighborhood…but I do think they exist.
Is it Better to Rent?
There are increasingly an enormous numbers of rental houses, apartments, etc. in Virginia Beach, and Chesapeake, VA.
The reason the rentals are so plentiful now is during the real estate boom, an enormous number of home owners took advantage of the opportunity to buy rentals for extra retirement income. Additionally several 500 Plus unit Apartment communities were built. They are all competing for your business against each other!!!! No longer do you have to rent in an apartment community, you have a wide variety of styles, settings, views, neighborhoods, and prices to select from! What I have found is you can now rent a Condo in VA Beach for $1,000 that would cost you about $1,700 to buy. The competition is overwhelming!
A search on Yahoo for apartments yielded 84 results in the $1,000 and under rent per month. The Pilot had 57 homes for rent and 14 Apartments listed in VA Beach. CraigsList yielded a wooping 326 results! We saw a Condo on CraigsList that rents for $805 where others were for sale on the same street for 170K. That is an enormous saving for the “rent is better” argument! You could easily save $600 per month in that instance. I hear people doing this and placing their savings into a CD and waiting for the bubble to burst! YOU CAN ALWAYS REFINANCE- You may NEVER recover from an inflated purchase!!! Timing is everything!!! This should be our first lesson in life!
I conclude in this analysis, that in Feb. 2008, in VA Beach and Chesapeake, VA it maybe a better idea to rent, place the savings into a CD, and wait for the market to settle to a more realistic price point. Take advantage of the flooded rental market. This is on the basis that you will purchase a home when the market cools with an expectation that it will rebound in later years.
Scott Jones
Topicslive.com
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