Should you rent a home, or buy a home? For some people, just being in a home is enough, but over time what’s it costing those who choose to rent rather than buy? A better question might be, how can a person go from renting to buying a home in markets with excessively high home prices?
“The rich have no problem buying homes.” – Logan Mohtashami, AMC Lending Group, Irvine, Calif.
This topic was undertaken by researchers at Realtor.com and dissected on Bloomberg.com in an article titled “Not Buying a Home Could Cost You $65,000 a Year.” A goal of the research was to demonstrate whether or not buying a home puts (or keeps) more money in your pocket than renting.
The results of the study show, and not surprisingly, that buying a home is far more financially beneficial than renting, at least in some of the country’s largest markets. In making this determination, Realtor.com looked at projected interest-rate and home-price increases across the next 30 years.
Focusing on 382 U.S. housing markets, the study found that in the majority of the 15 biggest, when people go from renting to buying a home they’ll gain distinct advantages, often to the tune of hundreds of thousands of dollars over the target 30-year period.
Buyers in San Francisco and Seattle, were they to begin their home ownership today, would realize the greatest return – nearly $300,000 compared with people who rented during the same period. Boston and Tampa buyers would gain about $220,000 compared with renters. Buyers would benefit to the tune of more than $100,000 over 30 years in other markets including Philadelphia, Los Angeles, Phoenix and Atlanta.
Two major Texas markets (Dallas and Houston) were the only ones among the 15 larger U.S. markets studied in which buying a home instead of renting would return only a negligible financial benefit of less than $10,000.
Many find it difficult to go from renting to buying a home
The Federal Reserve in May released its Report on the Economic Well-Being of U.S. Households in 2014, which found that 81 percent of renters would like to buy their own home but can’t afford it. This is an issue among those who rent homes and apartments across the United States, and it’s a particularly difficult issue here in Silicon Valley.
It doesn’t take a research study to teach us that it’s better to own than to rent – although the Realtor.com study did open our eyes to just how huge the benefits might be many areas when you go from renting to buying a home. Our bottom-line common sense tells us that by owning, we build equity, which is worth something in real dollars, whereas by renting, we’re literally just spending money.
But what’s an individual or family to do when buying isn’t possible and renting is taking all their money? Well, the easy answer is figure out a way to buy. While it can be difficult for some renters to get a home loan in select Silicon Valley communities, it may not be impossible if they were to expand their home search to include areas where prices are more moderate.
A lot of thought is involved in making the decision to go from renting to buying a home. A professional Realtor can help by supplying specialized knowledge of many local housing markets and trends, with the goal of landing you in a home of your own. If you’re serious about moving into home ownership and would like to explore all the creative methods of accomplishing that goal, I’d love to speak with you. Call (650) 947-2942 and let’s talk about how to make it happen.