The news this summer has been a bit daunting for potential Denver home buyers, and buying a home may seem like an act of willful optimism. As the US housing market struggles to regain a strong foothold in the economy, a basic shift is underway in consumer thinking. The era of viewing home ownership as an investment is fading, and home buyers are beginning to view their purchase with a new eye.
The idea of housing as an investment began after World War II, when returning soldiers – and their desire to settle down – created a construction boom. Demand grew as their children, known as the “baby boomers,” grew up and bought homes. The inflation of the 70s, which increased the value of hard assets, helped make housing a good investment, as did the decline in mortgage rates from the early 80s. Today, in the midst of a foreclosure crisis, many individuals are met with two options: hold onto the dream of home ownership, or simply go the rental route.
Adopting a new attitude toward home ownership has become critical in today's real estate marketplace. Here are a few of the key benefits to be found in owning, rather than renting, a home:
-
First and foremost, a bank will only take the house back if you don't pay your mortgage, while a landlord can leave you virtually homeless on a whim. Landlords can decide that they want to live in their own property, or they can decide to sell the property (often giving you minimal advance notice).
-
Second, take a look at this interactive rent vs. buy calculator. Based on their default values, if you purchase and stay in your home for six years, buying is a far better choice. Over that six year period, it will cost you $745 less than renting. A fixed-rate mortgage means that your rate at purchase will never go up – unlike rental rates. Here are a few changes you may want to make in the calculator, to reflect current market conditions: In the Denver area, property taxes are closer to 1%, and current interest rates on 30-year fixed-rate loans are at record lows of 4.125%. Making these changes lowers the tipping point in favor of buying to four years, instead of six.
-
Third, the part of your mortgage payment that goes toward principal is a form of forced savings. Over time, investments made by renters have a nominal potential to increase in value. This would assume that the money was actually being saved (a challenge for many Americans) and invested, not spent.
-
Finally, finding a rental home with the desired amount of space, in an attractive community, with good schools is almost impossible. Homes meeting these criteria are virtually always owned, not rented.
Changing your perspective on home ownership is easy; the Bandy Team can show you just how easy it is. Call Bandy Homes today; we're happy to answer any questions you may have about the Denver real estate market. We'll show you all of the benefits of owning a home in Littleton, the perfect house in Parker, or a great property in Lowry (in Denver).
Marianne Bandy
Comments(3)