The Argument for Buying vs. Renting

Homeowners typically have substantially greater net worth than renters. In 2007, the Federal Reserve Board indicated the median net worth for homeowners was $234,200 compared to $5,100 for renters. As a homeowner you build wealth in two ways — by paying down the mortgage principle and through the appreciation of the home. In addition to building wealth, there are many other advantages to owning your own home, including tax advantages as well as having the freedom to do what you want with your own personal space. In the Rochester market, our homes typically appreciate in value but usually not as rapidly as other parts of the country. Conversely, they also haven’t depreciated as they have in other markets. Even with the ups and downs of the housing market, real estate traditionally is much less volatile of an asset than stocks.

Are you sitting on the fence trying to time the market? While price is an important factor, it should not be the only factor driving your decision. More importantly, the focus should be on the cost of owning a home. Cost takes into account more than just price. Cost is what your monthly/annual expense is to own a home. Interest rates have been incredibly low, allowing for many people to afford “more house.” If prices drop 10% but interest rates go up 1%, how does this affect your monthly payment? In most cases, your monthly cost will go up. Historically, when interest rates have hit bottom they then go up “quickly and dramatically.” It’s difficult to predict the market, but if history is a good indicator we will see interest rates take a sudden and significant jump in the future.

When looking at your monthly cost, you also should take into account the tax advantages. Don’t forget, your mortgage interest and property taxes are deductible. You may want to seek the advice of your accountant (or tax preparer) to help you calculate your anticipated deduction based on your tax bracket or visit the IRS Website.

Nothnagle agents are trained to handle all market conditions and have the expertise to help you take full advantage of the tremendous opportunities that are out there! Call a Nothnagle agent directly today to get started.

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