Home buying has earned a bad rap in recent years: The subprime
mortgage crisis and ensuing economic meltdown left many homeowners
underwater, unable to pay their mortgage, and even facing foreclosure.
Homeownership rates fell throughout the recession, and are currently
around 66 percent, compared with almost 70 percent in 2004, according to
the Census Bureau.
But the great American dream of owning a home appears poised for a
comeback. Real estate company Trulia reports that in many parts of the
country, rents are rising while housing prices are falling, making
buying a home more affordable.
Trulia found that in 98 out of 100 major metropolitan areas, including
Detroit, Atlanta,Chicago and Cleveland, buying has become more affordable
than renting.
If you're struggling with whether to buy versus rent, consider these 10 reasons to take the
plunge into homeownership:
1.
You can ramp up energy efficiency.
Energy-efficient improvements, from adding insulation to upgrading
your air conditioning unit, can reduce your monthly utility bill, says
Jane Hodges, author of the new book
Rent Vs. Own. While
renters can make plenty of green improvements on their own, from
unplugging appliances to turning off lights, homeowners can make bigger
changes, such as adding solar panels or installing an energy-efficient
roof. (Of course, a renter living in a one-bedroom apartment likely
uses far less energy than a homeowner in a three-bedroom house, so size
can trump energy improvements.)
2. You can customize your space.
Whether you need to knock down a wall to make a larger master
bedroom or redo the bathroom to reflect your Art-Deco tastes, owning
the space you live in means you have the freedom to do so, without
worrying about losing your security deposit.
3. Homeowners buy less furniture.
"Often when you're renting you need custom furniture that fits the
space," says Hodges, such as room dividers for a loft or miniature
furniture to fit into a basement apartment. "When people move a lot,
they can end up buying a lot of furniture," she says. If you buy a home
and settle in for the long haul, you can likely purchase a few pieces
that will stick around.
4.
Owning a home forces you to save.
The so-called "forced savings" argument is a widely-held one: Since
homeowners have to pay their mortgage every month, they are routinely
putting money away (and into their house, which they own), instead of
squandering it on new shoes or fancy meals. Then, if you eventually sell
your home after the mortgage is paid off, there's a good chance that
"you'll walk away with a payoff," even after subtracting the
costs of ownership,
says Hodges. (Of course, homeowners who face foreclosure or declining
home values often find themselves without such equity to show for their
monthly mortgage payments.)
5. Homeownership allows you to build a second income stream.
From taking in a renter in a spare bedroom to renting out driveway
space to commuters, Hodges says homeowners are increasingly finding
ways to monetize their homes. In cities with scant green space, some
homeowners even rent out small patches of grass for people who want to
grow vegetables.
6. No landlord can kick you out.
Renters can face an unexpected eviction notice if their landlord
suddenly decides to sell the home, rent to someone else, or otherwise
end the lease. That's one reason Boston University economics professor
Laurence Kotlikoff says that for older people with a fixed income in
particular, he recommends homeownership (and a paid-off mortgage).
"It's important for older people to be in a home that they own as
security against a landlord," he says.
7. In fact, you don't have to speak to a landlord, ever again.
Landlords can take ages to fix a broken dishwasher, let the air
vents fill with dust and particles, or leave pesky messages about
repairs. If you're the homeowner, then you're in charge—which means you
have to be home when the plumber calls, but the plumber reports to
you. (And, of course, you also have to pay the plumber.)
8. Unlike rent, a fixed mortgage can't go up (even if inflation does).
Fixed mortgage rates don't go up, even if the cost of everything else does. To protect yourself, Jack Otter, author of
Worth It… Not Worth It? suggests
making a 20 percent down payment and taking out a 30-year fixed
mortgage to lock in today's low interest rates. "Mortgage rates haven't
been this low since GIs were heading home from France. Lock in a low
monthly payment, and you've just taken a huge step in protecting your
family against inflation," he writes.
9. Homeowners can take tax deductions.
The chief tax benefit of homeownership is the ability to deduct
mortgage interest payments, but the perks don't stop there. Homeowners
can also deduct eligible expenses (certain energy-efficient
improvements, for example) and in some cases can avoid federal taxes on
earnings from the sale of a home.
10.
You can take advantage of currently low interest rates and prices.
Interest rates remain at historical lows, and at the same time, home
prices in many areas remain soft. Trulia points out that deals are
especially appealing in suburban areas, compared with the more
expensive cities. Overall, Trulia says, asking prices on homes went
down 0.7 percent over the last year, while rents went up by 5 percent.
Of course, buying isn't for everyone. If you might move soon, or you want the flexibility to
upgrade your digs
with just a month's notice, or your job outlook is uncertain, then
renting can be ideal. Hodges says potential buyers should first consider
the transaction costs of homeownership, which can add up quickly,
especially if a buyer doesn't plan to stay put for very long.
"During the bubble, people were looking at homes as a tool to make
money," says Hodges. Now, they just see it as a place to live.
Several government agencies are reviewing data to determine what will be the minimum down payment required under the new Qualified Residential Mortgage (QRM) guidelines scheduled to be revealed in the next few months. In the original 