The Age Old Question Rent vs. Buy

For as long as I have been covering Real Estate, and even decades before that, the question has been pondered, whether it was a better time to rent or buy a home. You would imagine that most Realtors would always say it is better to buy – but truth be told, 6 years ago, it really was a better time to rent. Oh, but how the tides have changed since!

According to CNN Money, “There are several reasons. Home prices are falling. Mortgage interest rates are at historically low levels and rents are on the rise. Of course, many renters are not in a position to buy. For one, it's hard to get a mortgage these days, despite low rates. And paying rent can push them further away from being able to afford to buy.” Overall, cost is down for home purchases while rental prices are continuing to rise – if you can even manage to find a property to rent. It’s partly as simple as supply and demand. More homes available to sell – prices are lower, while fewer rentals available to rent- prices are up.

“Rising rents make it harder for people to save for a down payment, which is the biggest barrier to buying a home that aspiring homeowners face,” Jed Kolko, Trulia’s chief economists says.

While supply and demand are indeed a large part of the equation, low interest rates and tax benefits cannot be ignored. Although we have heard many times over the last few years that mortgages are being offered at historically low rates, there really hasn’t been a time in recent history where they have been offered at these current low rates. Most lenders agree that there is no further room for them to decrease.

In addition, with tax day fast approaching, tax deductions have never been more important. A homeowner can gain tax benefits for their property taxes and interest paid on the first one million dollars of a first mortgage and interest paid on an additional $1,000,000 of a second mortgage. When you rent your home, you will not have access to these write offs. On top of that, you will not build equity in your property since you don’t own it.

Ken H Johnson, a professor of real estate at Florida International, who has extensively studies the “rent vs buy” quandary believes home prices nationally have bottomed out. “The ship has turned,” he says. “Markets should slowly start to recover. Housing will return to its traditional role of a safety investment.”

There are so many great incentives to buy a home right now. Whether for a tax benefit, low borrowing rates of the ability to build equity through ownership, buying a home continues to be a wonderful investment in your family’s future.