Is Owning Your Own Home Still Ideal?

In some cities it is actually cheaper to rent

Economic conditions may be driving more Americans to choose tenancy over the American dream of home ownership. Owning one’s home was at one time an ideal, when renters realized that for the same money, they could own a home. Real estate was thought of as a guaranteed investment. This perception has changed in terms of it not being a safe bet anymore. The theory that buying a home is cheaper than renting is being turned upside down. In some cities it is actually is cheaper to rent.

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  • Alfred Edmond Jr.

    This is a very good article. However, it must be understood that when you rent, you are not buying the same thing as when are paying a mortgage, even if you are spending less to rent on a monthly basis.

    When you rent, you are paying for the right to reside in a space for a specific period of time. Simply put, you are paying for use of a space. When you stop paying, you have nothing.

    When you pay a mortgage and other expenses of ownership, you end up with an asset–the equity accumulated in the value of the home, which will reach 100% assuming the home is kept until the mortgage is paid off. While the value of that asset can and will appreciate and depreciate, it will likely always be greater than the zero equity that results from renting.

    Both owning and renting will provide a roof over your head, which should be the top reason for either option. The mistake many made over the past 20 years was trying to treat the housing market as if it was the stock market, seeking to buy and sell homes for profit (like stocks) or treating home equity as an all-purpose piggy bank, instead of investing in a long-term asset.

    If the accumulation of assets–the bottom line when it comes to building net worth (wealth)–is the objective, homeownership still beats renting. The fact that less than 50% of blacks on their own homes compared to nearly 75% of whites is a major underlying factor in the wealth gap facing African Americans.

    Renting is a great short-term solution for certain situations and in certain housing markets, but it is a temporary solution at best. Home equity remains the single largest asset comprising the net worth of most individuals. The fact that the expense of renting may be less on a month by month basis does not change the fact that increasing home ownership by black Americans remains a key to building a foundation for long-term wealth. In fact, unless a person saves and invests the difference between what they are paying in rent and what they would be paying on a higher monthly mortgage payment and related expenses, renting delivers ZERO value from a wealth-building standpoint.

    Renting as a long-term housing solution makes about as much sense as renting a car instead of buying one. It makes sense for some people, in some cases. But generally speaking, it’s more beneficially and makes more financial sense to own. For both cases, it’s usually best to get the best deal possible, on the best home/car you can find for you and your family’s long-term needs, and pursue a buy and hold strategy.

    Remember, when you rent, you’re still paying a mortgage. Your landlord’s mortgage.

  • http://www.plancorr.com Antoine Orr – Financial Coach & Author

    I would like to offer a different point of view. 1. A person who rents and a person who has a mortgage are in the same boat…both are renting. One is renting from a landlord while the other is renting from a bank. 2. If the interest rate on a mortgage is for example 6%, but the annual home appreciation rate is 4%, the home-ower (not a typeo) annual rate of return is -2%. 3. The idea that a person can build wealth through taking out a loan, has proven to be mathematically flawed. If you would like to continue this discussion, please visit http://www.plancorr.com and click on the “webinars” tab or contact me at (240) 473.1314

  • http://www.askcurtis.net Curtis A. Wright, Sr.

    Renting vs. buying is a tough decision that can only be made by YOU! Only YOU understand the stability of your current job. Only YOU know if you can afford to live where you want in the price range you can afford. Unless your company supports an Employer Assisted Housing program you may not be able to afford to buy or rent near where you work. Only YOU will be the one trying to sell your home if a better job or job transfer comes about. Times and attitudes have changed because YOU like many others are unsure of the direction the economy is headed. Owning a home is still the American dream and can still be a good investment opportunity. Renting gives you flexibility while owning can provide a sense of stability and empowerment. Both are good but which is best for YOU? I’d love to hear your comments & thanks for your time.

    • Adjy

      Buying a Home is Cheaper Than Renting in Most Cities CNN Money (johnmurphyreports.com) Share this:ShareFacebookTwitterDiggRedditStumbleUponEmailPrintLinkedInLike this:LikeBe the first to like this post. Categories: Twin Cities Real Estate Tags: Banks, Credit (finance), Home, Home Buying, Home Loans, Housing, Loan, Mortgage loan, Real Estate, Underwriting Comments (0) Trackbacks (0) Leave a comment Trackback