|
Even when the market is good buying a home isn't always the most economical choice.
Let's say you have the opporunity to buy a house for $100,000 and the mortgage, plus taxes plus home owner's insurance plus average repair costs plus any other fees like HOA fees is exactly the same as rent. You'd think that the house is building your net value because it will increase on average 3.65% per year in appraised value. So after you're 30 year loan, you now have a house worth over $290,000.
But in order to get that house let's say you had to pay 20% up front or $20,000. However, if you had invested that $20,000 in the stock market with an average yearly return of 10%, you'd have made over $348,000 dollars instead, enough to buy that $290,000 house with $58,000 to spare.
Of course rent is volatile and can increase over time, but so are insurance and repair costs to a degree. Tax costs also increase over time with the greater appraised value of your home.
Another thing too is due to inflation, that $20,000 is worth more now than it will in 30 years. In 30 years the $290,000 or $348,000 would be worth about half of what it would be today. So do you use the $20,000 for somthing else you could purchase and enjoy that money today or wait 30 years for it to hopefully become $145,000 or $174,000 by today's values with the hope you'll still be alive to use that money then?
And what if you need to move? Selling and repurchasing another home isn't cheap. Sadly, if you buy high and the labor market tanks in your area and you have to sell, you will likely have to sell low and then buy high in another area where there is better work, whereas with renting it's usually much easier to move at whim even with yearly contracts.
__________________
|