a home is probably the biggest financial decision most
of us will make. While many variables factor into that
decision, one key element is whether it makes more
financial sense to buy a home rather than renting one.
to industry experts, it depends on how long you plan on
staying in a home.
certain parameters, I can tell you that if you intend to
be in a home for three to five years, it is almost
always better to buy," noted Matt Brady, a loan
officer at Skyline Home Loans.
because even though there is sizeable upfront
expenditure when buying a home, youíll be seeing the
benefits after a few years.
of the biggest advantages to owning that people overlook
is the principal reduction that is made by owners,"
Brady said. "This is not something that is
overlooked by landlords, because youíre making their
reduction is the amount paid on the cost of the home
itself and not the interest. The idea is that by the
time you plan on selling the home, youíll have paid
some of the cost of the house and will get more for it
than you paid for, resulting in spending less over time
than you would have renting a similar place.
home prices are high in San Diego ó the median price
is $535,000 for a home, $400,000 for a condo and
$623,750 for new construction ó area rent is also high
and increasing. The median rent for a one-bedroom is
currently $1,560; for a two-bedroom, itís $2,020,
according to the latest figures released by Apartment
List, a national rental marketplace. Thatís a 4.6
percent increase over last year.
calculates the financial benefits of owning a home this
to the National Association of Realtors, most people own
a home for approximately nine years before selling. If a
renter initially pays $2,200 for a two-bedroom home,
after nine years, the rent will have increased to $3,000
at a 4 percent increase per year.
the renter will have paid around $40,000 less in rent
over those nine years than a buyer who purchased a
$400,000 home, the ownerís home will have appreciated
by about $200,000 in those nine years, Brady said. (And
while no one can predict the future, most analysts
assume that home prices will continue to rise and that
San Diego will stay apace with the national average of a
4 percent annual increase).
homeowner also will have paid down the mortgage by about
$73,000 and had the added tax benefits of owning a home,
which according to Brady would be about $40,000. In nine
years, a buyer is ahead more than $225,000 from someone
continuing to rent.
bottom line is unless you can rent the $400,000 house
for $1,500, it makes much more sense to purchase
it," Brady said.
a home is not for everyone. Renting is often less
stressful and more flexible. But if youíre ready to
settle into one place for a while, go over the numbers
to see what works best for you.