In today's market, an increasing number of savvy consumers are asking themselves whether they should rent or own a home. Julia Keady, president of the Silicon Valley Association of REALTORS® advises potential buyers 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, Keady 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, Keady said.
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. Now that the stock market is behaving erratically, Keady said more investors are looking at real estate as a more stable, long-term investment.
Keady points out that homeownership is how many American families begin to accumulate wealth. According to data from the Federal Reserve Board, a homeowner's net worth is 46 times that of a renter's.
If you are planning to move fairly soon, you may want to consider renting, Keady said. But if you plan to live in the area a long time, now is a good time to buy a home. Home prices have gone down and with rates remaining low, mortgage money hasn't been this cheap in nearly 40 years. Buyers who are having trouble coming up with a 10 percent to 20 percent down payment may be able to get FHA financing with as little as 3.5 percent down.
But Keady cautions, "Housing is not a quick-in, quick-out investment. When purchased for the long term, housing is one of the safest investments consumers can make."
Of course, homeownership is not just about money. Homeownership provides shelter and security to families, and fosters involvement in community life as well as participation in democratic institutions. Homeownership also provides important social and economic benefits. It is the cornerstone of a healthy community and the basis for positive community involvement, Keady added.
Consumers who are considering buying a home should contact a REALTOR® in their local market, who can help them begin to build their future through homeownership. To find a REALTOR® in the Silicon Valley region, visit the Silicon Valley Association of REALTORS® Web site at www.silvar.org.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please email or call the SILVAR office at (408) 200-0100.