Rent vs. Buy
Because of many factors and costs to consider, the decision to rent vs. buy continues to plague the minds of many. A strategy for one person may not be a prudent strategy for another. Hence, the answer is rather relative as oppose to an absolute or universal decision. The real estate market is one of a cyclical nature, with periods of ebbs and flows. However, the key is stability and longevity to withstand downturns.
Whether to rent or buy is a question that looms in the minds of many. The answer simply depends upon the current market conditions and the needs of the consumers. Over the past decade, owning has been a financial success for most people, with prices rising almost in a straight line, with low, low interest rates feeding into the equation and with homeowners' equity subsequently bounding higher. Conversely, in certain markets such as New York, Baltimore, Raleigh, and San Antonio, the decision to rent is a prudent strategy in which the costs are more affordable. Housing prices are still out of reach for many in certain major metropolis. Additionally, factors and costs must be considered, such as return of investment, return on investment, interest rates, price to rent ratio, pros and cons of renting, pros and cons of buying, homeowner's insurance, rental insurance, neighborhood choices, and mortgage options. However, the most critical aspects that warrant primary evaluation are price-to-rent ratios and interest rates. These two aspects help facilitate the outcome of the remaining eight factors and costs aspects.
In the end, deciding whether to rent or buy a home has much to do with your own interests and personality. A strategy for one person may not be a prudent strategy for another. Hence, the answer is rather relative as oppose to an absolute or universal decision. The real estate market is one of a cyclical nature, with periods of ebbs and flows. It is a confusing time in the market. On one hand, mortgage rates are at record lows, and in many cities, home prices have plummeted. Conversely, home foreclosures continue to rise, and the economy remains weak. Whether you decide to rent or buy, each has many pros and cons to consider. Arends (2010) purports, "First, homeowners need to look first and hardest at present cash flow. The cult of homeownership made no sense. If renting is much cheaper than buying, think seriously about it. There is no such thing as a "safe" investment."
Analysis: Rent vs. Buy in Real Estate
While home ownership provides security, it may not give one the returns provided by certain other investments. With history as a guide, one can reasonably expect roughly 8% annual gains on your stock portfolio over the long-term (Smart Money, 2011). Generally, house prices have a direct correlation to the rate of inflation. Buying a house is not strictly a financial decision. This may sound simplistic, but one should find a neighborhood and a house that is desired. Moreover, exercising due diligence to check on the sales price trends of homes in that neighborhood, interest rates, and mortgage options are critical. Over the past decade, owning has been a financial success for most people, with prices rising almost in a straight line, with low, low interest rates feeding into the equation and with homeowners' equity subsequently bounding higher. Perhaps, this is just about as good as it gets and conditions are going to deteriorate at least somewhat, with prices likely to stabilize or retreat a little and with interest rates set to rise at least modestly. Hence, the decision to rent vs. buy continues to plague the minds of many.
Rent vs. Buy Defined
As the housing bubble inflated, the math increasingly favored renting. House prices went up and up while rents stayed relatively flat, meaning one could realized cost effective measures by choosing a lease over a deed. Now, with the housing market in a pulp, the tables are turning.
Undoubtedly, it is easy to toss around reasons as to why it is always better to be a homeowner (that mortgage-interest deduction) or it is always better to be a renter (no property taxes, and who wants to fix his own garbage disposal?). For example, if one decides to buy, it's in his or her best interest to put down at least 20% of the purchase price, to avoid private mortgage insurance (PMI). However, the more complicated truth is that at certain times, it makes more sense to be a renter or homeowner in which many factors need to be considered before making a prudent decision.
Factors or Costs
Many factors...
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