Should I Rent or Buy My Next Home?

Home ownership has long been an integral part of the American dream. Now, many former homeowners are renting instead of buying. Due to the bursting of the housing bubble, in many areas, home values have dropped by fifty percent or more. Many homeowners are paying on a mortgage balance that is greater than the value of their home. Many have just walked away from their homes because they could not sell them for enough to pay off the mortgage. Having lost their jobs or having enormous medical bills, many have had their homes repossessed by the mortgage holder.

More Single-family Homes are Available as Rentals

Faced with these conditions, renting appears to be a more realistic option for many. Formerly, most rental units were apartments or condos. With the tide of repossessions, a lot more expensive homes are available as rentals. Many homeowners, reluctant to take the loss they would suffer by selling in a severely depressed market, are renting their homes. This means that renters that can afford to do so, can rent a fine home.

Level of Market Uncertainty is High

A home has traditionally been a family’s largest asset. Quite often, it was their most profitable investment because the value reliably increased over time. That may not be true for the foreseeable future.

Short-term Renting May Be Sensible

It may be cheaper to rent short-term. The landlord pays taxes, insurance and maintenance. The renter does not need to budget for such unforeseen expenses as a new furnace or roof, but the rent is a total loss. Home ownership produces equity in the home.

Renting With Option to Buy is Attractive

The biggest advantage of home ownership is knowledge that the the owner can do exactly as they please with the home and yard. Many landlords will not even allow a change of paint colors. The uncertainty of not knowing when the landlord will terminate the lease can also be disconcerting. A rental agreement with the option to buy would make sense in the current environment. The renter would have the option to purchase the home for a specified price and have the rent applied to the purchase. If the economy and market conditions improve over time, the renter could feel more confident about buying the home.

Land Contract Is Alternative Option

Buying a home on a land contract should be considered. The buyer makes a modest down payment. They then make monthly payments on the contract. The principal is amortized the same as a mortgage. When the principal is fully paid, the buyer receives a deed to the property. The advantage to the buyer is the property can be purchased without obtaining a mortgage loan, and they are building equity in the home instead of just paying rent. In a worst-case scenario, they could abandon the contract without being responsible for paying the balance owed.

Home ownership can still be attractive long-term.

Peter Wendt is a writer and researcher specializing in Austin homes for sale. For readers who are interested in learning more about this subject, Peter recommends they check out 360RE.com.