In weighing whether to rent or buy, let’s focus on building equity.
Think about these points:
- No one can time markets. You may buy a home at a peak in the market, but dips that follow are often temporary. Real estate trends should be measured over the course of many years considering most homeowners stay in their home for an average of 13 years, not 13 months.
- Homes are not guaranteed to escalate in value. Over time, the worst-case scenario is that a home's value escalates marginally or stays about the same. Most do not lose value over an extended period of time.
- You have to live somewhere, so either way, you will have a monthly housing cost, whether it be rent or a mortgage.
- A mortgage paid off over many years costs a lot of money in interest. A home requires maintenance and repairs costs, so nothing is free. But once a mortgage is paid off you have EQUITY. You don't have any equity after 30 years of renting, or 60 years, the full span of time on average that we need housing in a lifetime.
- Rents rise. Most landlords do not offer 10-year leases or even 5-year leases. Most tenants are not guaranteed low rent for life. Most renters also move more often, and moves are costly. Even a 2% annual rent escalation becomes significantly more expensive over decades.
So instead of the narrative questioning the levels of WEALTH you create (or don't) via home ownership, maybe it’s more rational think about it as EQUITY BUILDING. I would much rather have something to show for housing payments in the form of equity at the end of several decades than rely on my investing skills while paying (rising) rent.
