As interest rates rise and home prices remain at all time highs across the country, many clients are reaching out with the question – “Should we buy now or rent?”
Surveys show that most people still want to buy a home. The National Association of Realtors in 2021 reported that millenials made up 37% of buyers, baby boomers 32% and 24% were Gen Xers. A pretty even split!
Home buying is still viewed as a good investment. 44% of Millenials think that investing in real estate is better than investing in stocks. According to the Federal Reserve, the median net worth of homeowners is approximately 40 times the median net worth of renters. Wow ok, so what to do? Well with the tax deductions for home ownership now limited, we really do stress looking at other factors such as where you want to live, for how long and do you have the cash to support home ownership such as repairs and maintenance which can be costly. And if you don’t invest in a home, will you put your money in other investment vehicles or spend it on non appreciating assets? What is your best use of funds? There is never a perfect time to buy. This decision is about the perfect time for YOU. Markets go up and markets go dowbn, interest rates go up and interest rates go down so much like the stock market, speculation is dangerous and playing the long game is a safer alternative.
To me, the question of home ownership and whether now or later, is a much more personal than financial one.
Now please understand that renting is often the best solution for many people. In fact, according to the Harvard Joint Center for Houseing Studies Report, higher income households drove 70% of renter household growth. Renting in your preferred location with amenities like a pool, fitness center and concierge services is a choice for many well paid professionals across the country who don’t want to commit the time and money to home ownership and maintenance. Entrepreneurs often like to be mobile and move without the headaches of selling a home. Again, a great choice as long as you also continue to invest wisey in other areas.
So my answer is, “it depends”.
For more information on the tax deductibility of home ownership, go to www.wendybarlin.com and look at our Resources page.