When it makes more sense to rent
Buying a house may be the American dream, but there are times when it may actually make more sense to rent. One of these times is when things are such that the costs associated with renting are significantly less than the costs associated with owning. This can happen when housing prices have increased dramatically due to the effects of a housing bubble, but rental prices have not kept pace. For example, in the some areas in 2004 the mortgage expenses for an average 3br 2ba home would have been around $900 with taxes & insurance; rents were almost exactly the same. Now in 2006 mortgage payments on that same house would be around $1600 per month — but rental rates have increased to only about $1000 per month. This is an example of a market where it may actually be less expensive to rent than to buy, especially if you don’t plan to be there longer than a couple of years. Being able to “inherit” a rent-controlled apartment that is significantly below market rates is another example. Of course, no one knows the future, so it depends on your goals and what may or may not happen, but renting can be a viable option as well.
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December 4th, 2006 at 2:56 pm
You make an interesting argument here, especially when you look renters’ short-term circumstances. But for one’s long-term financial health, I’d say buying still makes the most sense. The whole idea of getting a mortgage is so that someday you won’t have to pay for the roof over your head – which is especially important once you’re retired and no longer earning income.
Renting long-term may save you a few hundred dollars a month, but with a rising life expectancy you’d better make wise choices as to how to invest that saved money so that you’ll have enough of it to continue paying for the roof over your head into your 70s, 80s and even 90s.
December 4th, 2006 at 10:27 pm
I agree with what Wealthy Geek was saying. Although after some price increase, as in this case the ratio was 1600 to 1000 per month, I’d still take the 1600 per month knowing that that amount is not being thrown out but used to pay off the house I own. While renting, your throwing out 1000 a month and it goes nowhere.
December 5th, 2006 at 10:55 pm
I think it also depends on what you would be doing with the money you wouldn’t be spending on rent, and what kind of return you can get on it if you’re investing.