To Buy or Rent? - insights on a common question
Original post made on Feb 20, 2009
Read the full story here Web Link posted Friday, February 20, 2009, 12:00 AM
on Feb 20, 2009 at 8:27 pm
This is a typical cheerleadering pep-talk on homeownership by a real estate broker. It offers no financial analysis on rent vs. buy and, therefore, not much credence on what the author is try to preach.
* "…the rent you are paying is producing zero future financial benefit."
A $900k home only collects $3500/mo of rent in Danville. You have to pay approximately $6k a month (prop. tax and insurance included) to own it. The large disparity tells you the price is still too high. I would not say an extra $2500 each month producing zero future financial benefit.
* "By the time we will recognize the true bottom of the market, prices will already be on their way up."
A "L" shape housing price for the next several years is more likely than a "V" shape. As any savvy financial person can tell you, it's better to get in when the price is the way up than on the way down.
* "It's important to remember that foreclosures account for just a small percentage of all homes sold."
If you keep getting in at the wrong time, the percentage will get bigger, and you certainly don't want to be in the statistics.
* "Homes typically appreciate in value over time."
Unless you stay in the same house "over time", you may get stuck and foreclosed if you get in at the wrong time.
* "You likely know that the tax write-offs of mortgage interest are among the biggest financial benefits of home ownership."
I just want to remind you the tax write-offs means paying $1 to get 25 cents back for most people.