You may no longer be priced out of the real estate market, but that doesn’t mean you should buy a home. While some people may scoff at the idea of paying monthly rent payments instead of a mortgage, owning doesn’t always make the most financial sense.
How long you plan to stay in a home, the location and your financial situation should all play a role on whether you buy or rent.
Record foreclosures over the past few years have pushed home prices lower, but they have also turned many homeowners into renters. According to the Commerce Department, home ownership is at its lowest rate in 15 years even though buyers are starting to move back into the market.
“Deciding whether to rent or buy depends on your own personal situation, both from a financial perspective and a lifestyle perspective,” says Jill Simmons, of real estate website Zillow. “Zillow’s analysis found that for most U.S. buyers, if you plan to live in your home at least three years, then buying is a better financial decision than renting.”
Where you decide to live should also play a role in deciding whether to rent or buy. According to Simmons, if you are moving to a more expensive market it will take longer for it to make more financial sense to buy over rent.
Zillow has a breakeven horizon tool that shows how many years it will take for home ownership to pay off. The tool takes into account all possible costs associated with buying and renting, including a down payment, mortgage and rental payments, transaction costs, property taxes, utilities maintenance costs, tax deductions and opportunity costs. It is adjusted for inflation and forecasted home value or rental appreciation. According to Zillow, it would take you 8.3 years on average to breakeven in San Jose, Calif., compared to 1.7 years in Detroit.
December 3, 2014 //
Tyrone Holmes New York, NY (BlackNews.com) -- The Prison Policy Initiative released a r...
November 13, 2014 //
Article courtesy of US News & World Report via "The Rundown" It might be time to rethink the ...