Are you currently renting? Before you sign another lease, be sure to weigh out the benefits of homeownership. Buying is cheaper than renting in 100 of the largest metro areas by an average of 37.7% according to a report by Trulia. That may have some thinking about buying a home instead of signing another lease extension, but does that make sense from a financial perspective? Let’s look at a few key details from the report to help you see the other side.
In the Trulia report, Ralph McLaughlin, Trulia’s Chief Economist explains:
“Owning a home is one of the most common ways households build long-term wealth, as it acts like a forced savings account. Instead of paying your landlord, you can pay yourself in the long run through paying down a mortgage on a house.”
The report listed 5 reasons why owning a home makes financial sense:
- Mortgage payments can be fixed while rents go up. This is helping your landlord financially, not you.
- Equity in your home can be a financial resource later.
- You can build wealth without paying capital gains.
- A mortgage can act as a forced savings account.
- Overall, homeowners can enjoy greater wealth growth than renters.
As a seller, you would be most concerned about ‘short term price’ – where home values are headed over the next six months. As a buyer, however, you must not be concerned about price, but instead about the ‘long term value’ of the home.
The latest Rent vs. Buy Report from Trulia also shows that while interest rates have remained low, and even though home prices have appreciated, they haven’t outpaced rental appreciation. Delving into homeownership makes sense both socially and financially. If you’re one of the many renters out there who would like to evaluate your ability to buy this year, let’s get together to find your dream home.