Before the real estate market crashed in 2008, most people thought house prices would always go up. But in the final quarter of 2008, home prices dropped by 12.4 percent, the largest drop in the previous 30 years. Does that mean buying a home isn’t a safe investment? Not at all. In fact, most of those losses have been recovered, and then some, over the last decade. There are other factors in the decision of whether to buy or rent though. Let’s look at some of the benefits of owning a home vs renting.
Some Benefits of Owning a Home vs Renting
When you rent a home, you have a limited ability to customize it to make it your own. You can only do so much with furniture and other parts of the decor. Owning your home gives you the freedom to do whatever you want – repaint, renovate, etc.
Owning your home means predictable payments as well, at least if you’ve got a fixed-rate mortgage. You’ll be able to budget for mortgage payment costs for the next several years where rent may be subject to annual increases of an unknown amount.
Owning your own home also gives you potential tax benefits. Recent changes have limited the maximum deductions allowed but you can still deduct a certain amount of those payments. Rent is simply not deductible.
Financial Benefits of Ownership
The biggest advantage of owning your home, from a financial perspective, is that you’re building equity with every payment you make. Sure, a lot of the payments are going towards interest, especially at the beginning of your mortgage term, but some of every payment is paying down how much you owe on the home.
Over time, this equity can build to a significant amount, especially if the value of your home appreciates over time.
The other financial benefit of owning your home is the potential cost-savings compared to renting. The cost of ownership is lower than the cost of renting when considered over the long-term. Especially once your mortgage is paid off and you don’t have to make those payments any longer.
Things to Consider for Renting vs Buying a House
There are a couple of factors to consider when deciding whether to rent or buy a home. First, how long will you stay in the area?
If you don’t expect to live there long, buying a home may not be the most cost-effective option. There are costs associated with buying and selling a home. Amortizing those costs over a longer time makes them insignificant but they can add quite a bit to your housing costs if you buy and sell a home in a short period of time.
Keep in mind that house prices can fluctuate as well. Over the long-term, home prices have steadily increased but when broken down into shorter terms, prices could go up or down.
If you’re only planning to live in the home for a short time, say a year or two, market changes could result in losing money when the time comes to sell.
Rent vs Buy: The Bottom Line
There’s no single best answer to the question of owning a home vs renting. There can be situations where renting makes more sense but those cases are unusual. For most people, owning a home makes a lot more sense financially as well as socially.
If you’re in the market for a home in Contra Costa County, the Laura Wucher Team can help you find the perfect place. Take a look at our current listings and get in touch with us today to find out what we can do for you.