Which is a better idea for your situation? Are you in a spot to take advantage of the lower home prices we have been seeing for some time now? Perhaps you are wondering if your cheap rent would be beaten by a home purchase in terms of long term costs.
The short answer is "yes" but how many years will it take to break even?
There are many things that factor into that calculation, and there are indeed sometimes when it makes less sense to buy a home. This calculator is very useful in doing some calculations of your own, with your situation. Try playing with the advanced settings for buying, renting, and general. Keep in mind that first time home buyers tend to underestimate maintenance and upkeep, as well as furnishings and increased utility bills.
The common sense knowledge passed on by nearly everyone is "buy a home as soon as you can." This is based on the housing market pre 2007-now. Buying a home for your family is a fantastic idea as long as you do not see it as an investment, but a place to raise a family. Unfortunately, too many saw their homes as ATM's (and took out Home Equity Line Of Credit loans, or HELOC) and many people are facing tough decisions right now. Many very intelligent people did not see anything wrong with home values, and had the mind that if they did not get in NOW they would never be able to buy.
My philosophy on this is a bit different. I rent a small apartment, in not the greatest area, but I am within walking distance to a lot of fun stuff. We could never afford to live in this area and still be able to take care of our priorities. My wife and I agree that we are in no rush to buy a home, and that we see our "need" for a home coinciding with having a child. We're just not there yet, and we figure, why rush it? Another reason that is not pointed out often is that there is no opportunity for compound interest in real estate. Compound interest is exactly what we are trying to go after at a younger age as opposed to later on in life because it is so much more powerful with even a few extra years to work. Contrarians, but it works pretty well for us, and that is the bottom line.
What's your view?
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Why do we need a house when it's just the 2 of us, and we have car payments, student loans, etc?
ReplyDeletePeople need to get off the house buying bandwagon, and stop saying that it's what "everyone" used to do back in the day. Most of our parents couldn't afford a house until their mid 30's, when they had kids. Makes sense to me!