First-time home buyers as academics

[lightning]

Renting is not a sin, and rent is not throwing your money away.

If you start out with little down, then the majority of the payment you make to the bank is interest.  How is that any different from rent?

By renting, you have OPTIONS and Options have value!  You can walk away, owing nothing, with very little notice. You do not have to risk paying for breakdowns or TERMITES or broken pipes, or a huricane blowing down a fence or a roof.  You dont pay extra for insurance, and if you think that property values are variable, so too are property TAXES !!!  A special assessment could come your way at any time!  If you rent, you can 'opt out' by moving away with minimal notice. 
(IF the state finally decides to make up the retirement plan shortfall and raises property taxes, you are stuck!  And you can not sell fast enough to avoid paying! 
My parents lived in the country on a dirt road.... until the county decided to pave it and assess each property owner by the foot for each foot that the property came in contact with the road to pay for it!!)

If the AC goes out, the hot water heater, the dish washer, or the tree roots break the sewer pipes or the septic system needs emptied.... Renters do not pay these costs. Owners do... OR they do without while they save to pay for it if they own the property (and the problems!!) 

Renting is the best option many, many times! 

and then there is the NEIGHBOR Problem!  Homeowners 'own' their neighbors too!  renters with problems can give notice and not have to put up with for instance, the basketball bouncing at 11 pm at night, the weekend shade tree mechanic's junker, the weekend frat parties,   the disagreeing couple...

I can't disagree with any of your hypothetical scenarios that *could* happen to a homeowner. There's definitely an element of risk. But I could easily list and bore you to death with a bunch of hypotheticals when it comes to renting. But I won't give you any hypotheticals. I'll give you real examples that have happened to me, before I stopped renting, and examples of people that I know.

Getting kicked out of a rental house with 3 week's notice on a month-to-month lease, because the owner wants to sell the unit on the hot market.

A landlord who will do the absolute minimum on fixing a heater (just enough to keep from getting in trouble, but not enough to actually keep the tenant warm in February).

A landlord who won't fix the plumbing because they don't think it's their problem or their job, and blame the tenant for clogging up the pipes.

A landlord who won't fix a gas leak.

Section 8 neighbors, who use Section 8 for the wrong reasons.

Landlords who think they can enter your unit or house at any time, for reasons other than repair.

A landlord who drags their feet with fixing A/C in August.


Regarding interest, yes, a homeowner must run the numbers and run financial projections, to make sure that they indeed, in their own specific situation, will at least recover some or all of the $ that they sink into a home that they own (and ideally more get more back when they sell). If they don't, yes, they could end up spending so much in interest that it's impossible to have any kind of viable plan to recover or make the $ that is invested into a home. But at least the possibility of recovery and/or making $ is there, if finances are managed properly (assuming one has a TT position, which is the premise that the OP given us as context). With renting, there is no possibility.

[AvidReader]

Renting is not a sin, and rent is not throwing your money away.

If you start out with little down, then the majority of the payment you make to the bank is interest.  How is that any different from rent?

By renting, you have OPTIONS and Options have value!  You can walk away, owing nothing, with very little notice. You do not have to risk paying for breakdowns or TERMITES or broken pipes, or a hur[r]icane blowing down a fence or a roof. 
[. . .]
and then there is the NEIGHBOR Problem!  Homeowners 'own' their neighbors too!  renters with problems can give notice and not have to put up with for instance, the basketball bouncing at 11 pm at night, the weekend shade tree mechanic's junker, the weekend frat parties,   the disagreeing couple...

A landlord who will do the absolute minimum on fixing a heater (just enough to keep from getting in trouble, but not enough to actually keep the tenant warm in February).

A landlord who won't fix the plumbing because they don't think it's their problem or their job, and blame the tenant for clogging up the pipes.

Section 8 neighbors, who use Section 8 for the wrong reasons.

Landlords who think they can enter your unit or house at any time, for reasons other than repair.

A landlord who drags their feet with fixing A/C in August.

Spouse and I rented for years and now own, and we have had all of the above (plus tornadoes and floods). With our recent purchase (when I was NTT), it came down to the math. We had saved carefully previously and had enough for a down payment; the monthly mortgage payments on our large, comparatively luxurious home with a nice backyard are lower than rent for apartments half the size. We are already planning to sell, but if we sell for exactly what we paid (and the house is valued much higher) we would still come out far ahead, even with realtor and bank fees, than the equivalent months' rent. This was not the case in several other places we have lived. While all the points above are valid, I think this question is more location dependent than career status dependent.

AR.

[clean]

Remember that Tenure Track means you are on a year to year contract - especially in the first few years. 
In my experience with contracts, in the first year, the university can tell you as late as the end of the first academic year (April/May IF you will be renewed for August!  After the first year, they usually only have until December to tell you IF you will be back in the next year.  From then on, they must give you only one year's notice.  Usually, that will be at the end of the academic year, but that is NOT required!  (One of our faculty was told in December 2021 that he will not be back after the Fall Term 2022 . 

How much risk do you want in your life?
Is having a mortgage risk reducing in your life or adding to that risk?


In reply to Lightning's reply, Most likely, IF your neighbors are renting under Section 8 housing, that is probably not a rental location that a typical faculty member would be FORCED to take.  Faculty may choose to live in such a place, but most likely there are alternatives. Those alternatives will almost certainly cost more, and may even require a longer commute, but it is unlikely that an untenured faculty member would have no other choice.

As for the landlord stories, I will simply say that as a RENTER you have the CHOICE to FIRE YOUR LANDLORD!  You dont have anywhere the same choice as a homeowner!  (IF you own, and the owner isnt able to fix the appliances, who do you complain to?  IF you rent there are at worst, legal remedies!)

Finally, IF your only option is to stay with such bad landlords, then you can not afford the house payment anyway, so being a homeowner is not even an option for you anyway! 


There are certainly circumstances where owning might be a better option, especially in the long run, but remember that "in the long run we are all dead".  We live in the short run, and the options that are provided by renting may well outweigh the inconveniences of renting. 
Once you have stability in your life, which may be partially available through Tenure, it is a safer time to buy.  Until then, as I indicated above, unless you are CERTAIN that you can afford the downpayment, are willing to take the loss of being forced to sell soon after buying, renting is safer (and, as noted above, Not a sin!)

[clean]

Tangent alert!!

In my graduate school days, several faculty members obtained tenure.  After they did they seemed to make a major 'purchase'.  Several bought cars, some bought houses, and others 'had children'.  I thought that you could measure the value of tenure, in part by measuring the values of the major purchases. 

There are 2 sides to this value... there is the (small) increase in salary that comes with promotion (not tenure, technically) and the lowered discount rate on those future salary contributions from the reduced risks that come with tenure. 

Given that tenure (and promotion) comes with a raise, and a lowered risk and resulting discount rate, there is an increase in wealth assocuated with tenure that makes it easier to purchase a house!

(Finally note, one state that I have worked for has explicietly stated that "Tenure has no value".... that they have stated that there can be no claims against the state for the loss of tenure!  ... So DOES it have NO VALUE, or does it have SO MUCH value that the state (or their attorneys!)  have LEGISLATED (or contractually stated) that it does not so that they do not have to ACTUALLY PAY if someone were to lose it!
)

Return to normal programming...

[lightning]

One of the final discussions that I found very useful, on the old CHE fora, before the CHE closed down their fora, was the same discussion that we are having now. There was an economist that laid out the numbers for everyone. It was a very convincing argument to rent for the long term and not buy a house. I wish he/she came over here to the new fora, to chime in on this discussion. He/she always had great analysis for anything regarding $, especially real estate, taxes, and retirement.

I had no argument to counter her/him other than the anecdote of my own life experience, and others that I knew who also benefited from buying as soon as possible and sticking with the practice.

YMMV.

[mahagonny]

Renting is not a sin, and rent is not throwing your money away.

If you start out with little down, then the majority of the payment you make to the bank is interest.  How is that any different from rent?

By renting, you have OPTIONS and Options have value!  You can walk away, owing nothing, with very little notice. You do not have to risk paying for breakdowns or TERMITES or broken pipes, or a huricane blowing down a fence or a roof.  You dont pay extra for insurance, and if you think that property values are variable, so too are property TAXES !!!  A special assessment could come your way at any time!  If you rent, you can 'opt out' by moving away with minimal notice. 
(IF the state finally decides to make up the retirement plan shortfall and raises property taxes, you are stuck!  And you can not sell fast enough to avoid paying! 
My parents lived in the country on a dirt road.... until the county decided to pave it and assess each property owner by the foot for each foot that the property came in contact with the road to pay for it!!)

If the AC goes out, the hot water heater, the dish washer, or the tree roots break the sewer pipes or the septic system needs emptied.... Renters do not pay these costs. Owners do... OR they do without while they save to pay for it if they own the property (and the problems!!) 

Renting is the best option many, many times! 

and then there is the NEIGHBOR Problem!  Homeowners 'own' their neighbors too!  renters with problems can give notice and not have to put up with for instance, the basketball bouncing at 11 pm at night, the weekend shade tree mechanic's junker, the weekend frat parties,   the disagreeing couple...

One advantage I see with owning is let's say your mortgage payment is $1000. On a thirty year mortgage, it's still the same amount many years later. Your payment doesn't keep up with inflation. Some who bought two years ago when inflation was low would now be paying a monthly amount that is worth less than it was when the deal was made. Of course, if your income is suffering from inflation, you're still screwed. But you might be able to do something about that and your mortgage payment is locked in.
Right? I could be wrong. I get the impression that you (clean) know a lot about money.

[Puget]

One of the final discussions that I found very useful, on the old CHE fora, before the CHE closed down their fora, was the same discussion that we are having now. There was an economist that laid out the numbers for everyone. It was a very convincing argument to rent for the long term and not buy a house. I wish he/she came over here to the new fora, to chime in on this discussion. He/she always had great analysis for anything regarding $, especially real estate, taxes, and retirement.

I had no argument to counter her/him other than the anecdote of my own life experience, and others that I knew who also benefited from buying as soon as possible and sticking with the practice.

YMMV.

All conditions are local. I'm sure that's true is some markets. Here I'm paying less per month for a house (including property taxes and insurance) than I was for renting one bedroom apartment, and houses really are a good investment here. Most importantly I'm SO much happier, with my garden and hot tub and room to spread out. I can't imagine renting all my life.

[clean]

I can't imagine renting all my life.

Let me be clear.  I am NOT suggesting that it is a good idea to rent your whole life!  I am addressing the question posted by the OP... is it best to buy before tenure?

If I have left anyone with the impression that renting for life is something that I would advocate, that is not my intention. 

Purchasing a home is a great thing to do WHEN THE TIME IS RIGHT! 
I have been advocating that Pre Tenure is generally not the right time!!

[Puget]

I can't imagine renting all my life.

Let me be clear.  I am NOT suggesting that it is a good idea to rent your whole life!  I am addressing the question posted by the OP... is it best to buy before tenure?

If I have left anyone with the impression that renting for life is something that I would advocate, that is not my intention. 

Purchasing a home is a great thing to do WHEN THE TIME IS RIGHT! 
I have been advocating that Pre Tenure is generally not the right time!!

Again I'd say all conditions are local. It could be risky some places, and for some people. But I could sell my house within days for $100k+ over what I paid for it 3 years ago (and that's been true over the past decade+ here), plus 6-7 years is a long time to rent.

[dismalist]

But I could sell my house within days for $100k+ over what I paid for it 3 years ago (and that's been true over the past decade+ here)

Great. Then where would one live?

[Ruralguy]

I think he just means that if he absolutely had to cut and run, he'd be able to do so at a profit, and use that fuel life elsewhere. Of course, it could end up being but a drop in the bucket of a down payment in some locations, but also in many it could be substantial  fraction of the value of a good home.

[dismalist]

I think he just means that if he absolutely had to cut and run, he'd be able to do so at a profit, and use that fuel life elsewhere. Of course, it could end up being but a drop in the bucket of a down payment in some locations, but also in many it could be substantial  fraction of the value of a good home.

In the same location for a similar house, prices would also have risen at the same relative rate!

For  a different location or a different house, one could have purchased at the same time as the original purchase [at a different price].

The only improvement from a pure price rise is to sell, and then to buy a smaller house, spending or saving the rest.

[jimbogumbo]

I think he just means that if he absolutely had to cut and run, he'd be able to do so at a profit, and use that fuel life elsewhere. Of course, it could end up being but a drop in the bucket of a down payment in some locations, but also in many it could be substantial  fraction of the value of a good home.

In the same location for a similar house, prices would also have risen at the same relative rate!

For  a different location or a different house, one could have purchased at the same time as the original purchase [at a different price].

The only improvement from a pure price rise is to sell, and then to buy a smaller house, spending or saving the rest.

I think there is another solution, again dependent on where you buy. Sell, then move to a lower cost of housing state. Admittedly, that assumes you stay in purchased homes until you retire.

You often have to accept that the area you relocate to may be "different" than where you are now, but if you choose carefully not too much. An academic in a high cost city who wants to live in a similar cultural and political environment can easily fond a home in a Midwest university or college town for substantially less money, and often bee astonished by how much more they get for the money.

[Puget]

I think he just means that if he absolutely had to cut and run, he'd be able to do so at a profit, and use that fuel life elsewhere. Of course, it could end up being but a drop in the bucket of a down payment in some locations, but also in many it could be substantial  fraction of the value of a good home.

In the same location for a similar house, prices would also have risen at the same relative rate!

For  a different location or a different house, one could have purchased at the same time as the original purchase [at a different price].

The only improvement from a pure price rise is to sell, and then to buy a smaller house, spending or saving the rest.

First, not a he if you're talking about me (interesting assumption. . .)
Second, this thread is about the relative risk of buying a house pre-tenure. Most people who don't get tenure are going to be moving elsewhere, so would need to sell their house and buy one (or rent) wherever their new job is. So what you say here doesn't apply--you (a) have to move, not buy a house in the same area, and (b) unless you can see the future, you could not have bought a house in the new location earlier. The question is if you would be better off renting or buying if you do end up needing to sell and move. I'm saying that isn't a question you can answer in general-- it is specific to each housing market. This should be pretty blazing obvious.

[clean]

The question is if you would be better off renting or buying if you do end up needing to sell and move. I'm saying that isn't a question you can answer in general-- it is specific to each housing market. This should be pretty blazing obvious.

IF you just moved to a town to take a job, how could you know the answer? 
The statement, " it is specific to each housing market. This should be pretty blazing obvious" seems to me to be assuming certainty.

IF you knew a) the rate of change of houses in specific blocks in a specific town over a short period and b) whether your contract would go the full time toward tenure (whether you would have the full 6 years, or be released after a pre-tenure review), and finally c) whether you would ultimately gain tenure at the end of the tenure process, then this decision would be "pretty blazing obvious".

I will also add that we could add to the uncertainty that YOU like the school and town and YOU want to stay.  That YOU like that house and neighborhood and dont want to move (and that your life circumstances dont change making that house unsuitable  - because you got married, divorced, had triplets, or adopted triplets! 

The bottom line is that for a newly hired untenured assistant professor (who may even have tons of student loan debt) there is usually little certainty! 

I will add that debt adds risk!  (Beta is a measure of financial risk.  look up "Hamada Beta" to see one estimation of the formula relationship).  It may be better for a new hire to concentrate on paying down debts incurred while finishing grad school and saving a down payment.

Finally, even the salary is unknown, actually.  Will you be OFFERED to teach summer classes?  How many?  Are they guaranteed to make?  My own advice is that you should NEVER DEPEND ON SUMMER MONEY!  It is not guaranteed!  Live on your 9 month wage and IF you get paid in the summer, that is money that you can use to pay down debt or save up a down payment (or for retirement, so you never need to teach another summer!).

Refrain:
Debt adds Risk
Risk is bad for your mental and financial health
Summer money should never be counted on (and Never depend on it to make ends meet!)
Renting is not a sin!  There are many times it is the wisest option as it adds options!
A new hire (transplant to a city) is unlikely to have the insight to have any degree of certainty to know many things about the job, the housing market, or even their own life circumstances! 


last word.

We hired a great faculty member 2 years ago.  He brought in credit toward tenure and we did his Pre Tenure Review this Academic year, and he would go up for tenure in 2023 .  Some committee members asked, "Do we have to wait?  Can we offer him tenure now?"  So he is a shoe in to get an offer for tenure  in 2023. 
He just quit.  While he loves the place and the area, his wife Does NOT!  She wants to go back to the NE part of the country and be closer to her family.  So he is faced with the "Green Acres" situation in reverse, except that they have a child, so the option for him to stay is, in reality, non-existent. 

Clearly, IF he had known how unhappy she would be here/away from her mamma, he would NOT have purchased a house!  Even though he was on a short tenure clock and the risks looked limited!  While housing prices have gone up, have they gone up enough to cover the commissions for selling?  The added moving costs (which are never fully reimbursed)?  At this point, the decision is not financial, so he will take whatever loss he must take.