Wednesday, January 8, 2014

Should I Buy or Rent a Home in 2014?

January is a time for making resolutions, decisions and taking stock of one's life. It is a time when many resolve to make a change for the better or their future. It is no wonder there is an uptick in real estate activity the first week of any new year. Finances are one of the things many resolve to put in order and since housing expense is one of the biggest part of any budget, it follows suit that many consider the age old question, "Is it better to buy or rent a home?"

Why should anyone consider buying a home? It is hard to tell whether the economy is good, bad, improving or declining these days. Some media reports say things are improving while other indicate the immediate future is not so rosy. One statistic I recently read in REALTOR Magazine can put things into perspective for the individual. In an article written by Lawrence Yun he states, "On average, home owners have a median net worth of nearly $200,000 while renters are essentially living paycheck to paycheck, with only $4,000 in net worth on average". That is a HUGE difference. 

Location, Location, Location In determining whether it is best to rent or buy a home, location is a factor.  Real estate web search company Trulia, issued a full report last summer on the rent versus buy dilemma. One of the tools they shared is an interactive map of the US showing what metro areas are most affordable.Because length of time you plan to live in a home and tax bracket are key to the equation, these variables are included. The Minneapolis/St Paul metro area is a good place to buy in many circumstances. And, in my opinion based on the average price per square foot, buyers considering a purchase in the very affordable north & east metro, might consider it an excellent opportunity.
By the Numbers If indicators are good geographically, that provides only part of the answer. To determine whether to buying a home is the best option, price of the home, taxes and interest rate on the mortgage need to be considered. Another very helpful tool is a Rent Versus Buy calculator  It is simple to use: Enter your current rent, the price of the home you are considering, and a few other details to receive a detailed report. The calculator will provide an indication of where you will stand financially 6 years after purchasing a home if you have to sell. An interesting feature of the tool is the sliding scale that allows you to adjust the estimated property value increase (or decrease). 


Copyright 2014