Renting Versus Buying a Home

The question of whether to rent or buy a home hasn’t been at the forefront like these days in more than 50 years. But the real estate collapse is adding pressures to a major economic decision that could either help or hinder the future of millions of Americans.

Homeownership represents a great source of personal pride for many people. Others seem to simply want to own for economic tax advantages, the principal mortgage reduction. Still, others just don’t want to deal with a landlord and some simply want their own place to call “home.” Whatever the reasons, homeownership has been burned into the conscious of Americans for generations. “Owning a piece of the American Dream” has been a hall mark of the National Association of Realtors marketing program for decades.

Moving Day

Critics of homeownership say it does not present the best financial opportunities – that many people do much better investing their money elsewhere.

However, buying during a period of economic uncertainty or trouble has also historically spelled the difference between great fortunes and financial ruin. Investors during the Great Depression era lost millions of dollars in equity, and millions of Americans are going through the same process these days.

So is it time to buy or rent? The answer to that question is as multi-dimensional as there are buyers for real estate. In a nutshell it comes down to what your own intentions are. If you are looking to purchase your first home or move up into a larger home and have good job security or are otherwise financially stable this could be the best time to make a purchase in decades. But if you are uncertain about your employment it wouldn’t be advisable to take the plunge until you’re sure you’ll have the money to keep making the mortgage.

Sure, interest rates are at the lowest level in decades and the housing market in many regions of the country hasn’t seen prices like this in years. It’s a bargain-hunters paradise. But what about the “bigger” picture? How long will it be before the overall economy improves? How long will it be before your own economic picture stabilizes?

Do you work in an industry like advertising that goes up and down with economic cycles? Or are you stably employed as a physician? The answers to those questions illustrate your financial situation and taking an un-emotional inventory of your finances, despite what outside influences might say offer the best answers to your own housing decisions.

Americans generally follow the pack. That’s why lines at amusement parks are longer on the left, and why even though there might be a clerk that’s not as busy at the grocery store most of us get in line right behind the next guy. And that’s why when the housing market mania triggered the bubble, most people followed the leader and bought in if they wanted to. Millions of first time real estate investors made handsome profits. And the last “guys standing” got stuck with properties that in almost all cases today are worth less than they paid.

The thing about not following that pack is amazing. Some say timing is everything in life. Maybe the most successful real estate investors have that thing called timing.