Thursday, October 20, 2011

Should I Buy or Should I Rent?

Courtesy of Keeping Current Matters


Buy-vs-Rent.jpg
We believe very strongly that now is the time to buy a home. Some will say we are just saying this to create real estate transactions and commissions. Because of that, today we will quote what those outside the real estate profession are saying to the people who look to them for financial advice.

The Wall Street Journal

Last week, in an article entitled It’s Time to Buy That House, the WSJ told their subscribers:
“It’s an excellent time to buy a house, either to live in for the long term or for investment income…Houses aren’t the magic wealth creators they were made out to be during the bubble. But when prices are low, loans are cheap and plump investment yields are scarce, buyers should jump.”
In an article two weeks ago, MarketWatch.com (the on-line blog for WSJ) told their readers:
“Now could be the best time in history to buy a home.”

Forbes.com

In a report to their subscribers, Capital Economics reported that:
“The previous declines in house prices and the more recent drop in mortgage rates to record lows have created an unusual situation in which the median monthly mortgage payment is more or less the same as the median rental payment.”
Why is this important? Last week, Forbes explained to their readers:
“If rents simply kept up with inflation at a 3.2% annual increase, a $1,500 rent payment would cost that renter nearly $900,000 over the next 30 years. The same $1,500 payment made to their mortgage would be only $540,000 (because the payments don’t increase with inflation).”
They went on to explain the advantages of homeownership during retirement:
“Even with a dismal 1% growth rate over 30 years, a $300,000 property would appreciate well over $100,000 giving the homeowner an additional nest egg for retirement…
At a time when retirement is becoming much more challenging, an extra $400,000 (or likely more) can make a major difference not to mention the impact of NOT having to pay a mortgage.  How much less would you have to save for retirement if you didn’t pay the mortgage?

Bottom Line

When the iconic financial newspaper and the iconic financial magazine say that it now makes financial sense to purchase a house, perhaps it’s time to buy a home.

No comments: