The newspapers are of full of articles reviewing the real estate market in 2011 and offering predictions for 2012. Housing sales reached an all-time high in 2007 for both volume and median sale price. The median price of a U.S. home was $262,600 in March of 2007 and has since fallen to $212,300 (as of October 2011). With such a steep drop in prices, and with mortgage rates at a 40-year low, it would be easy to conclude that there is no better time to buy a house.
Home ownership certainly offers many advantages, not the least of which is the peace of mind that comes from owning the roof over your head. However, if your reason for buying is because real estate is a great investment, you need to proceed carefully. In my article “The Right Reason For Real Estate,” I explain in detail how homeownership has barely kept pace with inflation when you factor in all the costs associated with owning a home. Real estate taxes have risen faster than inflation in many areas of the country. A lot of municipalities face financial difficulties that would indicate this trend is most likely to continue. Before you rush out to purchase a house, consider the alternatives.
The New York Times published a wonderful article last May titled, “Is It Better to Buy or Rent?” The article includes a calculator that compares the cost of home ownership to renting. The calculator is simple to use and takes into consideration the tax benefits of owning real estate. Some people believe the tax benefits are so overwhelming that owning is always better than renting. The New York Times calculator shows you how beneficial this is by allowing you to enter your tax bracket.
I’m not trying to say that renting is better than owning. I want you to realize that depending on your situation, renting might be a better choice. You owe it to yourself to consider both options.