The postwar 1950s introduced average Americans to home ownership by way of cheap tract housing. By the mid-1980s, it was just expected that every young couple would purchase a starter home in their twenties, then gradually move up the property ladder as their family and income grew.
Today’s young people see the mistakes of the 2008 housing crash and are reticent to follow suit. Many are seriously considering whether or not buying a home is the right way to go. It should be understood that there is no one-size-fits-all housing solution. Buying a home is the right choice for some people but the wrong choice for others.
If you are considering renting rather than buying, here are five viable reasons your decision may be the correct one:
1. You Don’t Plan to Be Around Long
Houses are significant financial investments. Between sale price, interest, and all of the additional costs of buying, it generally takes between five and ten years to break even – which is to say that the market value of your home is equal to what you owe. If you don’t plan to be living in the same area five years from now, buying doesn’t make sense. You will actually lose money on the deal.
2. The Market Is Too Hot
Another good reason for renting is a real estate market that is too hot to touch. Though that’s the case in most parts of the country now, Salt Lake City, Utah, has been hot for a number of years already.
According to local real estate brokerage CityHome Collective, new and existing home prices in Salt Lake City continue to climb. However, at some point that will stop. Prices might even decline in a natural corrective scenario. Buy now and you could find yourself underwater when prices do fall. Instead, it might be better to continue renting until prices stabilize.
3. You Don’t Need the Space
Buying a home when you do not need all of the space it offers doesn’t make a lot of sense. You are paying hundreds of thousands of dollars for living space you will not use. Buying as an investment doesn’t make up for that, especially if it takes you longer than ten years to pay the mortgage. Why? Because when you add in the cost of mortgage interest, maintenance, and repairs, you are unlikely to get back everything you spent when you sell. Thus, you will have wasted money on unnecessary space.
4. You Are Tight on Cash
Buying a house instantly eliminates some of your liquidity. In other words, signing a mortgage document automatically commits a sizable percentage of your future cash to your home. If you are short on cash, this could be problematic. At least with an apartment, an unforeseen event forcing you to move will only cost the equivalent of your security deposit. With a house, you are still looking at having to pay your mortgage.
5. You Prefer a Simple Lifestyle
Last but not least, it is difficult to own a home and still maintain a simple lifestyle. Homeowners are too often tempted to accumulate stuff they have the space to store. They easily get bogged down in a constant cycle of home renovations that cost money but do not really add to the quality of life. If you prefer a simple lifestyle, renting is probably a better option.
Owning a home is neither good nor bad in and of itself. For some people, home ownership is the right move. For others, renting is better. You now know at least five reasons to consider renting instead of buying.