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Rent vs. Own - is now the time to buy?

Should I keep renting until prices go even lower?

January 30th, 2009

The best way to "play it safe" is to actually buy a home. Here's why: studies show that owning a home is the best way to build household wealth. The sooner a person owns a home, the faster they begin to build up equity and wealth. Studies are also showing that housing market is "bottoming out" and that prices are at rock bottom. There's only one way to go from here.

When buying a home, you're also buying price stability, knowing that you will pay the same monthly payment for the life of your 30-year, fixed-rate mortgage. Today's interest rates are also historicaly low.

Now consider the current rental market. While home prices have been moderating, rent continues to rise. In fact, rental rates in the Salt Lake area have been rising at about 8% per quarter! That's about on par with San Francisco! Where is the economic security in not knowing how much your rent will increase in the next three years? You don't receive any tax benefits from paying rent, nor do you accumulate any price appreciation, as you would if you owned your own home. If you are a first-time home buyer you are also eligible for a $7,500 tax credit from Uncle Sam.

All of the economic fundamentals show that this is a good time to buy a home. Continuing strength in rental demand signals that there is upward pressure on rental apartments. The real risk isn't in buying a home, it's continuing to rent.