The New York Times, in their Your Money section, recently ran an article titled In Defense of Home Ownership. In the article the author, Ron Lieber, takes to task the notion that now is a horrible time to buy a house. He mentions that despite the bad housing news we hear, stocks going nowhere, and unemployment not getting better, now can still be a good time to buy.
Here are his cases where home-buying can still make sense:
Rates Lower Than Ever
Fixed mortgage rates are at historic lows. People are locking in mortgages at 4.5% (consider the ’80’s when mortgage rates were in the high teens). For many, lower rates mean a more affordable mortgage and it could mean affording a home that was unaffordable a few years ago.
The author makes the claim that the payments you make towards your principal can be seen as a kind of forced savings. Yes, some will argue that a person can do better by renting and investing the difference. But you have to have the discipline to a) save the money; b) have an after-tax return renting that’s better than if you owned a home; and c) not raid the savings/investments along the way. When you buy a home, the money towards principal is your equity.
If renting were always a rosy experience then yes, there could be less incentive to buy a home. But renting isn’t always fun is it? Landlords have ways of making it difficult on renters if they want. How many of us have heard stories of landlords that were stingy with the heat in the Winter? Or how about noise and smells? Renting means being somewhat at the whim of the landlord and perhaps the tenants around you.
Wanting to Live in a Great Neighborhood
Some neighborhoods just don’t have much rental property. Some neighborhoods are gated or have strict rules against rental properties. If you want to live there, perhaps because of a super school district, you’re most likely going to have to buy.
As someone who just bought a home I can definitely agree with these points. With the housing crash and low interest rates, we were able to buy a home that would have been out of our budget with out the crash. We could have waited and perhaps saved more (though we put down more than 20%) but rates don’t have much lower they can go. They will go up! Our rate will be locked in for 30 years.
We’ve also had our experiences with a bad landlord/tenants/neighborhood. For a family of five there aren’t a lot of choices for apartments that can fit us all. And when you do find something you’re at the mercy of the neighborhood. Yes, you can get lucky renting, but it’s not always easy being in a rental.
As for being in a good neighborhood, one of the reasons we liked the neighborhood we picked is because of the good school district. There are rental apartments in the town but there really aren’t many; it’s mostly homes.
So does this mean it IS a good time to buy a house? You have to have your finances in order. Gone are the days when you buy a house looking to sell it at a profit a couple of years later. If you have the money and can afford a home, now could be a great time to buy if you are looking to live there long-term.