I recently participated in a meeting of local real estate agents and mortgage brokers, and one of the topics discussed was: Why rent when you can own for less? Why pay $1,000 per month in rent when the payments on a comparable home may be as low as $500-$600 per month? Why indeed.
At first glance the issue seems straightforward. If you purchase a home for $125,000—a price that’s easy to find in many areas—and put 10 % down, at current interest rates the monthly payment would be about $570. In metro Atlanta, for instance, that home would easily rent for $1,000 or more. It should be a no-brainer.
Not exactly. What if your job changes and you need to move? Or what if the needs of your family change and the home is no longer suitable? If the chances are good that you will be selling within the next five years, it’s generally better to rent. Appreciation on homes will be much slower in the coming years and those who need to sell quickly may find it difficult to recoup their investment.
Additionally, many potential buyers who could have easily obtained a mortgage under the loose lending requirements of the past no longer qualify. Others have had their confidence shaken by the continued economic turmoil, a condition expected to remain with us for several years. With the allure of rapidly escalating prices and quick returns gone, and with the potential for further declines in value, buying a home as an investment is no longer a viable strategy for wealth building. And while renters may lose the benefits of ownership, they gain freedom from the risks and obligations of a long-term commitment. Most rentals, on the other hand, are offered with relatively short-term leases. Should conditions demand it, tenants can more easily relocate.
Why rent when you can own for less? It sounds like a no-brainer, and for many renters it is. Choosing the option to rent may cost them a bit more annually, but the bonds of ownership are avoided altogether. In the end it’s a decision that can only be made when all the factors are analyzed, but the new paradigm for housing is a growing trend towards renting; and it’s a trend that is unlikely to change in the foreseeable future.
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