Deciding whether now is the time to buy a house or if renting is a better option comes down to personal budgets, property values, tax breaks and future plans, housing experts said. A nationwide Pew Research Center survey conducted in March found strong support for homeownership despite continued problems with high inventory, falling prices and low sales in a number of markets across the country. Data showed 81 percent of adults still said buying a house is the best long-term investment a person can make, down just 3 percent since 1991.
John L. Heithaus of the Metropolitan Regional Information Systems, or MRIS, said two big drawbacks to renting continue to be the inability to create equity through ownership and losing out on the Internal Revenue Service on mortgage interest deduction.
On the other hand, drawbacks to owning include purchasing more house than is affordable, unclear mortgage terms and faulty budgeting.
Buying right now, Heithaus said, really is for those people with a longer-term horizon who can benefit from an eventual uptick in the housing market.
“So, in this case a younger buyer would have the benefit of time on their side to add ‘compound interest’ to their home purchase, enjoy the benefits of tax deductions for mortgage interest and property taxes, and also be less susceptible to market fluctuations if the need presented itself to sell,” he said. “In my view, it’s very much an individual decision that encompasses many factors from personal risk tolerance, financial position, long-term vs. short-term tenure and more.”
Potential homebuyers need to take a personal inventory of their circumstances before deciding if they are ready to buy.
“Most of all, they need to have a stable job and income and be ready emotionally to make the commitment to staying in one home for at least five years,” said Michele Lerner, local metropolitan area author of “HOMEBUYING: Tough Times, First Time, Any Time.”
A stay of less than five years likely will result in financial loss, she said, so people who are not sure they will be in the metro area or who cannot be sure of their job stability probably want to rent, despite rising rental rates.
“In D.C., rents have risen and are expected to rise more in the coming year or so,” Lerner said. “Housing prices are stable, so most experts assume that prices will begin to climb.”
Interest rates also will be an issue going forward. “If interest rates rise even as little as one percent, Lerner said, “this will greatly impact your monthly payment and how much you can qualify to borrow.”
Buyers who plan on staying in the area, can afford to buy based on today’s rates and can get a fixed-rate mortgage will find jumping on the homebuying bandwagon makes more sense now than waiting several months down the road.
To help analyze the buy vs. rent decision, create a budget that shows the maximum amount available to spend on housing, whether that is how much a person wants to spend or how much they can spend.
Lerner said buyers and renters both need emergency funds set aside and must factor in down payments, security deposits or closing costs.
Heithaus said it is important that people make the decision with their heads and not their hearts.
