By Rose Meily
When you move to a new area, one of your first decisions is whether buying a house or renting is the best decision for you. Since owning a home is the American dream, many assume it is always to their advantage to buy a home. However, under certain circumstances, renting may be a better short-term option.
There is an upside to renting, according to Mickey Shaevitz, a realtor with Coldwell Banker in Los Altos and a member of the Housing Opportunity Committees for the California Association of Realtors (C.A.R.) and the Silicon Valley Association of Realtors (SILVAR).
“It really depends on your circumstances. For someone just moving to the area it may be better to rent before buying in order to familiarize yourself with the different neighborhoods,” said Shaevitz.
For anyone who plans to move again after a short period of time or would like to be free from home maintenance, renting may be the way to go.
Renting can cost seven times more annually than owning, according to a newly revised consumer education brochure from the National Association of Realtors. The brochure, “Why rent when you can buy?,” challenges assumptions about renting versus buying and helps realtors evaluate with their clients which option is right for them.
The Federal Reserve Board estimates homeowners have a net worth nearly 36 times more than that of renters. Over the past 10 years, the cost of rental housing in the United States has increased an average of 3 percent per year. Average rents are projected to rise 4.1 percent this year alone. With a 3 percent annual increase, a current rental payment of $1,000 per month would increase every year and amount to $137,567 after 10 years, with no wealth accumulation.
In contrast, a $210,000 home purchased today with a down payment of $10,000 and a 30-year fixed-rate mortgage at 6.5 percent would cost a steady $1,100 per month and yield a net worth of $138,521 after 10 years, assuming the historic 4.5 percent annual appreciation rate.
Shaevitz noted that buying a home is generally a good investment: if you plan to keep it at least three to five years to offset the costs of selling and moving, and benefit from appreciation; if you are psychologically prepared to take the plunge, because a house needs more care than a rental unit; if you have extra savings, because you will encounter costs for repairs and maintenance of a home; and if you can adhere to “forced savings” and are disciplined enough to pay your
