Buying vs. Renting A Tough Call
Before the housing market crashed during the Great Recession, homeownership was considered a no-brainer.
People were told to buy a home as soon as they could because it was the financial route to the middle-class American dream. Renting was a waste of money, was the conventional wisdom.
Now some people who would have jumped at buying a home years ago are weighing their options. Attitudes about homeownership have shifted, according to "How Housing Matters: The Housing Crisis Continues to Loom Large in the Experiences and Attitudes of the American Public," by the MacArthur Foundation.
"The American people believe that the country's housing environment is changing," the report noted. "While most non-owners aspire to own a home someday, homeownership is not viewed as the vehicle to building wealth that it once was, and the public believes that renting has grown in appeal while owning has declined."
When asked, compared with 20 or 30 years ago, how likely it is for families today to build equity and wealth through homeownership, two-thirds of respondents to a poll accompanying the report said it's less likely than in the past. And that sentiment was pretty consistent among all income and age groups.
Further, an overwhelming majority felt that renters could be just as financially successful as homeowners at achieving the American dream.
It's a good thing that renting isn't seen as being a financial failure.
Now that things are improving in the housing market, people may be tempted to rush into homeownership because they want to take advantage of lower home prices. Or they are afraid of missing out on still fairly low interest rates for home mortgages.
But if the time isn't right and the numbers don't work, better not buy. Keep on renting.
Let's say you could get a great deal on a home at a very low interest rate. But if you aren't sure you want to stay in a particular area and having a home would complicate a future move, you might want to reconsider a decision to buy. Most importantly, if you can't afford the payment even at the low rate, it's definitely not the right time to buy.
In the MacArthur poll, some people had to get a second job, stopped saving for retirement or racked up credit card debt trying to cover their housing expenses.
I understand that in high-cost areas, families are spending 40 to 50 percent or more of their net monthly income on housing. But I've found that if you are spending more than 30 to 36 percent on housing, you're likely headed for trouble.
I'm still a huge advocate of homeownership. However, when it comes to something as important and expensive as a home, you should take it slow. Take as much time as necessary for you to become comfortable with a decision to buy. Remember: Fools rush in.
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Source: Recordnet.com