Real Estate Facts: Over the Long Term, Owning is Better than Renting
July 2008
(471 words)
In today’s market, an increasing number of savvy consumers are asking themselves whether they should rent or own a home.
[Full name of your local association of Realtors®] advises that while there are many factors to consider in deciding whether to buy or rent, the most important questions to ask are:
“Can I afford to buy?”
“Is homeownership a good investment?” and
“How long do I plan to stay in my home?”
The answer to the first question may well be that you can’t afford NOT to buy, [full name and title of your local spokesperson] said. “None of the money you spend on rent is returned to you, either through savings or as an investment.”
Homeownership, on the other hand, has tax advantages over renting. And homeownership allows you to leverage your money, [last name] said.
When considering the investment value of a home, think about this: Dollar for dollar, the rate of return on an individual’s cash downpayment on a house is substantial. Buyers typically use their own money to cover only a small portion of the purchase price, but the home appreciation they realize is based on the total value of the property.
Homeowners benefit from the power of leverage. Over 10 years, a $10,000 investment in the stock market at a normal 10 percent market rate of return would yield $23,600. The same investment as a down payment on a $200,000 home at a normal appreciation rate of 5 percent would return nearly five times the average stock market return, at $110,300....
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