According to MSN Money, here are the three worst reasons for buying a house:
* It’s “better than the stock market.” “In the past 40 years, the average appreciation for homes has exceeded the inflation rate by only a percentage point or so. Compare that to stocks, which have bested inflation by 7 percentage points in the same period.”
* “I’m tired of throwing away money on rent.” (I am renting now.) “You’re not really throwing money away when you send a check to your landlord, anyway. You’re exchanging it for a place to live. You’re also getting flexibility and freedom — things you sacrifice when you buy a home.”
* “I need the tax deduction” This is just faulty logic. “If you’re in the top federal tax bracket, every dollar you pay in mortgage interest only saves you 35 cents in taxes. Most people get even less, since they’re in the 25% or lower tax brackets.” Even with the tax deduction, which might disappear or be reduced in the future, you end up paying more.
The best advice on the issue of whether to buy vs. rent remains the time-tested version: Buy a home when the timing’s right for you, when you can swing all the costs and when you plan to stay put awhile. That way you can ride out any downturns in the market and benefit from any appreciation while enjoying a nice and affordable home in the meantime.
When I’m ready to buy, the decision won’t be based on the market cycles. I’ll have a need, and as long as I fill that need smartly, I should be better off in the long run.
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I agree with you. Besides, I am getting a really good deal on rent ($605/month) and am able to bank a significant amount of money each month. Mere condos are going for 175-200K here in Portland, OR, so I will wait until the current madness passes…..
Great points. I have always been amazed to here people talk about how great a house is for an investment. When I would ask what the benefit is they always preach about the equity in their home or the tax benefit. I agree that equity is nice, but when you work the numbers over a long period of time the home appreciation is not necessarily the best investment vehicle. I think my dabbling in home ownership will be because I have a family and need the house.
I recently bought in Portland. Housing is sky high and I would not count on the appreciation to buy me a yacht, but it forces me to put money towards an asset. I would not have the discipline to spend the extra savings from rent in stocks etc., although I am a big fan. I do think a sensible mortgage is crucial though (fixed 15 to 30 year).
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