This is a guest-post from Tim Ellis, author of Seattle Bubble, a blog and forum dedicated to discussing real estate market conditions in the Seattle area. Tim is a long-time GRS reader. During my last trip to Europe, he shared a controversial article on renting vs. buying.

Given the fact that each year around sixteen million Americans move to a new county, it’s likely that at some point in your life you’ll find yourself moving to an unfamiliar area.

Starting a new chapter of your life in a fresh locale can be an exciting and memorable time, but it can also be rough on your personal finances. Many of the expenses associated with a major move are unavoidable, but there’s one major mistake that is easy to avoid: buying a home immediately upon arriving.

Maybe you’re tired of renting and homes are a lot cheaper where you’re going, or maybe you own a home in your old city and feel like it would be a financial defeat to go back to renting.

In reality, starting by renting when you move to a new city is anything but defeat. It’s actually the smartest decision you can make, both for your sanity and your bank account.

A real world example
In early 2007, a new employee (we’ll call him Ben) was hired to my team at work. Fresh from the midwest, Ben and his wife had owned a home in their old city, and were anxious to buy as soon as they moved to Seattle. I urged Ben to hold off, rent for a while, and get to know the area before making that level of commitment, but they decided to buy a home in a quiet suburban neighborhood north of Seattle.

Fast-forward to 2010: Ben and his wife have realized that the quiet suburban life isn’t their style. They would rather live closer to the city. Unfortunately, their home has depreciated so much that their entire 20% down payment is gone, and they would likely have to come to the closing table with a check for tens of thousands of dollars to sell their home.

Ben and his wife would like to move to a neighborhood that better suits their lifestyle, but now they’re stuck in a neighborhood they don’t really like until the housing market recovers.

Avoid the lure of the new-car smell
Everyone understands and accepts that when you buy a new car, it loses twenty percent of its value the moment you drive it off the lot. Buying a home (used or new) is similar. Even if home prices begin to appreciate regularly again, agent fees, excise taxes, staging, seller concessions, and other random costs add up quickly when you try to sell your home, sucking away about ten percent of the sale price.

There really is no way to know what neighborhood will work best for you until you’ve spent a good amount of time actually living in the area. Consider all the variables at play:

  • What’s the commute like to your work?
  • How convenient is shopping?
  • Is there enough entertainment nearby?
  • Does the neighborhood feel safe?
  • Do you like the neighborhood vibe?
  • Are there sources of noise at odd hours?

Wouldn’t you prefer to rent for a while and learn the area rather than buy right away only to learn after a few months that you’d rather live across town, but you’re stuck for at least a few years (or worse, like Ben) until the value of your home rises enough to offset the selling costs?

Give yourself time to find out what works for you
Don’t be tempted to take shortcuts when it comes to a decision as important as where you will live. You might think that you can do sufficient research online or get advice from people who do live in an area so you can make an informed decision from afar. Think again.


View this map in its own window

Above is a little map I made based on a recent forum thread on LinkedIn started by a simple question:

I have some friends who are relocating to the Seattle area. They will be working in downtown Seattle, have kids and about a $650K housing budget. Looking for thoughts on best cities to live in the Seattle area for education, school districts, quality of life, etc. Any ideas would be appreciated!

Each pin on the map represents an answer to this question that was offered by one of the commenters. Believe it or not, the Seattle area is somewhere under that mass of purple. Good luck making any sort of informed decision based on that mess!

The only person that can really know if you’ll like living in a given neighborhood is you. Buying a home is a major financial commitment, and rushing into a purchase before you’ve had time to get to know the area is a recipe for disaster. If you find yourself planning a major move, find a nice rental and take your time learning the ups and downs of your new hometown before you buy a new home. You’ll be glad you did.