When to Buy and When to Rent
Renting has been on the rise in America for quite some time, as student loans and credit card debt lock more and more people out of the market. Only 39 percent of people aged 25 to 34 own their own homes now—a 30 percent drop from the 1970s. Yet sometimes renting does make more sense than buying, especially when you consider the bigger picture. The housing market may reflect a logistical problem as much as it does a financial one. See when it's appropriate to buy a home, and when it makes more sense to rent.
Time, Money, Effort
Buying a home is not only a significant expense, it's a huge commitment of the owner's time and talents. Even renovated or newly constructed homes aren't immune from their share of plumbing mishaps or electrical malfunctions. It's no longer a matter of calling a landlord when this happens, it's a matter of coordinating repairmen, finding the money to pay them, and scheduling to be there when they arrive.
Americans may not be denying themselves a home because they can't afford it, they may just be thinking realistically about the tangible benefits of renting. After surviving the housing crisis, it was easy to see how a house could eliminate a financially secure future in one fell swoop. It's not always the American dream to have your own plot of land. Sometimes it's an American nightmare that combines thousands of dollars worth of repairs with a sinking depreciation value. Most experts agree that a home isn't supposed to be an investment strategy, but rather a major purchase that allows a person more control over an El Segundo property.
Homeownership usually makes sense if owners intend to buy a home and stay there. With the economy as up and down as it is today and career changes an everyday occurrence, this often isn't possible for many people to do. If a buyer isn't reasonably certain that they'll be able to stay in the same home for at least 5 to 10 years, they may want to consider renting instead. This is not only because it takes time for a home to appreciate, but also because the tax incentives a homeowner gets are only worth it if the owner intends to stay.
Every community has its own quirks when it comes to the housing market, and studying up on them can make it easier to decide when to take the plunge and when to play it safe. For example, there are transitional cities where rentals are so in demand that it can actually make more sense to buy a house to save some money. Many people make sound financial decisions by buying a house and then getting roommates to help with the cost, or buying a run-down home that can be fixed over time. But if homes are in high demand and your negotiation leverage is going to be slim to none, it's probably time to look into renting an apartment.
It's normal to worry about the consequences of renting. In one study, 41 percent of long-term renters said that they regretted choosing not to buy a home. However, no matter what anyone says, renting isn't throwing money away. It's a way to give a person a place to live without tying them down. Renters also have a unique opportunity to use their savings for a far more lucrative investment down the line.