By Lucas Bucl
Housing decisions are some of the biggest financial decisions most people make. They are clearly an important part of everyone’s financial plan. Given the burst in the housing bubble in 2006-2007, many people are rethinking the decision to buy vs. rent.
Prior to 2006, home prices in the U.S. steadily went up in nominal terms going back as far as the early 1970s. That means for more than a generation of homebuyers, all they knew about home prices is that they went up over time. This trend, which leads to the belief that home prices could not go any direction but up, contributed to the housing bubble. Now, in the post-bubble world, people are questioning the conventional wisdom about when buying a home makes sense.
With most financial decisions, the best choice depends on the individuals particular circumstances. Here are some key points to consider on both sides of the decision:
Factors that Support Buying a Home:
- You expect to own the home for at least five years. This gives you time to see some appreciation to offset the transaction costs of a home purchase/sale, such as realtor commissions and financing costs.
- You have stability in your work and personal situation that decreases the chances of an unexpected move.
- You are looking for a sense of permanence, community, and a place that is “your own”. These emotional factors play a big part in the decision to buy.
- You have the ability (and skill) to add value to your home by making improvements.
- You have pets that may prevent you from renting places with restrictions on size or breed.
- You have good credit and income, giving you the ability to qualify for a mortgage.
Factors that Support Renting a Place to Live:
- You need or want flexibility in your housing situation. This could be for career mobility, potential for relocation due to the pursuit of further education, marriage, or job transfer.
- You are not interested in managing the hassles that come with homeownership, such as repairs or improvements. Having the ability to call the landlord and have someone else deal with it is appealing.
- You value simplicity in your ability to change your living situation. Leases are by their nature impermanent, and getting out of a lease is much easier than selling a home.
- You have other debt that you are trying to pay off, such as student loan debt or credit card debt, and don’t want to commit to a mortgage.
- You are interested in living with roommates to reduce your housing costs.
For help deciding which arrangement works for you, schedule a meeting by clicking below, contact Lucas Bucl –lbucl@makinglifecount.com, or call (913) 345-1881.