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To Buy or Rent? - insights on a common question

Original post made on Feb 20, 2009

"Should I buy or rent?" With decreasing home prices throughout the Bay Area, this is a question that is no doubt running through the minds of many. The decision to rent an apartment, condo or house as opposed to buying is complex and one that should be taken into great consideration.

Read the full story here Web Link posted Friday, February 20, 2009, 12:00 AM

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Posted by James
a resident of Blackhawk
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.

Counter arguments:

* “…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.

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