January 15th, 2010
Why It’s a Great Time To Rent Rather Than Buy A Home
Owning a home is still the American dream, but in today’s unpredictable economic climate, it’s becoming more advantageous to rent a home instead of buy. With sluggish home sales, home values wavering, and stricter lending guidelines, buying a home is no longer a sure bet or the safest investment. The alternative, renting a home, offers flexibility on where and when you want to move and is, most importantly, more affordable.
Flexibility
As a homeowner, you have the stability and security that accompanies owning your own property, but you are also more restricted in your living situation. If you had to change jobs or move neighborhoods, there is much more hassle involved with selling your home and freeing yourself from your mortgage obligations. While home ownership is generally a healthy and stabilizing anchor, with the recession still in full swing and unemployment above 10%, you may need the flexibility that renting provides. With renting, you can negotiate to get out of a lease if you were required to move and you aren’t stuck with a 30-year mortgage commitment. It gives you more financial freedom and mobility to adapt to changes in your economic situation. Unless you have total job security and know that you will stay in your home for longer than a 3-5 year period, renting might be a better option for you.
Affordability
The added costs of insurance, taxes, down payment, maintenance, and closing costs of buying a home add up quickly; renting a home can save you substantially month-to-month versus mortgage payments. Financially-speaking, one of the benefits of owning a home is the prospect of your house investment gaining value over time and being worth more than when you initially purchased. When the housing market is up, your investment will gain in equity. Unfortunately, the housing market has not recovered from the recent collapse, which means you are paying a loan on an asset (your home) that is not appreciating in value.
What about that tax credit?
While Uncle Sam is hoping the homebuyer’s tax credit will prop up the housing market by encouraging people to buy homes, don’t let free federal money pressure you into believing that now is the most affordable time to buy a home. You might save $8,000 with the tax credit, but in a struggling housing market, you could invest thousands of dollars with no appreciated home value to show for it. Buying a home necessitates you are financially prepared for homeownership in the long-run, not that you can get a home cheaper right now. There is no rush to own a home, especially with a financial atmosphere that puts your investment at risk. If you choose to rent a home instead, you can save up money to go towards a down payment for a home later.
While it is still a great opportunity to own a home and build equity in an asset, renting in today’s housing market is more favorable for most people given the current economy. Renters have the ability to save money now and look to buy their dream home in a sunnier housing market outlook.
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you are right Justine, It is better to go for rental home if your job place keeps changing, it is the same case with me, my job keeps changing every 6-8 months so it is good to rent a home instead of buying one.