Does it make more sense to rent?

Posted by admin on August 17, 2009

Renting vs owning.  Renting works fine for some people.   In some areas rent prices have begun to come down.  How does that effect the difference between the cost of home ownership over the cost of renting?   I don’t think there is one right or wrong answer when it comes to the question, “Is it better to rent or own a home?”   There are pros and cons to both sides.

Owning a home is no longer a get rich quick type of investment.  Home ownership allows a set price for a house payment.  While the interest rates are lower than they have been in years, taking advantage of getting in on a fixed 30 rate allows the home owner to live in the home without the price adjusting upwards in the coming years.  Renting gives no guarantees to the amount of rent you’ll be paying ten years from now for the same size home.  Home ownership does build equity, over time.  If you plan to live in the home for awhile, chances are good that when you sell it you will get back what you put into it and then some.

Home ownership is very emotional for the homeowner.  Home owners have the advantage of upgrades and renovations.  How many people tune in to HGTV?   You won’t get this with a rental.  If I were renting I might paint a room (with the landlord’s permission, of course)  but there’s no way I would invest in upgrading somebody else’ property.

Home ownership has tax advantages.  Renting has no tax advantages.

Real estate is a fickle industry.  Housing prices have dropped but how low will they go?  Are we at the bottom yet?  And what happens when we do bottom out and prices begin to rise again?  Nobody will know that until the time comes.  By the time we know, it will be too late for those who didn’t take advantage when the time was right.  That is how real estate works.  All anyone can do is educate themselves and make the choice that works out best for their own situation.

Since the second quarter of 2006, US home values have fallen by more than 30 percent and more than 1 million homes were lost to foreclosure in 2008. Given the risks associated with buy a home, does it make more sense to rent? Greg McBride, of Bankrate.com, and CNBC’s Diana Olick discuss.