In response to Catherine Reagor’s article in the Arizona Republic on September 3, 2014, “Buy or Rent, What choice is right for you?” http://www.azcentral.com/story/money/real-estate/catherine-reagor/2014/08/24/phoenix-homeownership-levels-drop/14520313/ – I have a couple of points to suggest when reading her article.
First the “article” is more like a point counter point tilted towards renting. She flung stats around with superficial use and provided no in-depth analytical evaluation leaving the reader misguided in their understanding if taken at face value.
When you consider the purchase of a home, keep in mind it is just that, a home. A home is something you make your own, that provides shelter, comfort, safety and security for you and your family. You control what, when, where and how something is done to your home. When you rent, you are at the whim of the landlord to respond to any and all issues with the property. Some landlords are good and some are not. If you are allowed to make any improvements, it is to the landlords benefit. You have to decide if you want to give up that control.
As far as her pointing out that a median home price is $211,000; so what. There are homes in price ranges for just about everyone. Many of you are already renting someone’s $211,000 home and paying their mortgage for them. That is fine if that is your comfort level, not everyone wants to own a home.
A home purchase is an investment second. It’s an investment for your future and will be probably the biggest investment decision you will make so yes, it needs to be well thought out with many factors to consider. Investing in a home, unless your business is in real estate, is a long-term investment. The market is always up and down, just like other investments but real estate traditionally has been a stable long-term investment despite the ups and downs. You just have to be in a position to weather the ups and downs and be comfortable with the possibility.
Ms. Reagor talks about needing a down payment. Well yah! Lets have some skin in the game shall we? That is called planning and investing our money in our decision. When you have personal investment in your home, there is a tendency to put more into it to make sure you don’t lose it. Additionally, she is implying that a renter won’t have the tax or insurance burden of being a homeowner. The good news, she is right the landlord is responsible. The bad news is most of the time you still pay it in the rent as well as the HOA dues for those communities that have an HOA. We are smart enough to know that rent is not only to cover the mortgage; it is also covering all other expenses and any profit if possible. Even if you rent, you still should have insurance to cover your belongings and liability should something happen, so you aren’t saving anything here.
Here is one thing she said that really left me scratching my head. “The average rent in the Metro Phoenix area (Maricopa County) for an apartment is $820 a month.” I thought she was talking about comparisons for home buying not apartments. The inference I got in her bullet points was house. If you are comparing single-family residential units, then the average according to The Arizona Regional Multiple Listing Service is $1,327 per month for rent. She is misstating rent by $507 a month less than what her comparison should be. Additionally, if you look at the average rent prices from October 2011, was @1255 per month and September 2014 of $1378 per month you have a 9% increase in 3 years, or $123 a month increase. A fixed rate mortgage will never increase so you can depend on a steady housing expense. Based on the average of this 35-month period, you could potentially save $4305. And remember, when you rent, it isn’t yours so if the landlord wants to sell, you’ll have to start all over again and typically have 30 days notice to move. How fun right?
Mortgage rates. Yes they are low and will only go up, but nobody knows exactly when. It is always better to buy when you can get the best rate as long as all your factors add up for you. The timing and conditions have to be right; no one can decide that for you.
The last one I will address is the tax and expense figures that were thrown at the reader. Yes the homeowner gets a tax savings at the end of the year. She reports mortgage and interest figures are at $3,000 to $3,500 a year. For maintenance and upkeep she reports spending about $3,000 and $5,000 a year. The lower number was about right for my previous homes I owned. If you buy an older home, it may be more because of the age. However, what wasn’t mentioned is the fact the tax savings should be set-aside for that purpose, which will negate the majority if not all costs for maintenance depending on your situation. These costs will fluctuate from year to year as things age. Second, a home warranty is a good way to protect your major home expenses such as heater, air conditioner, water heater, garage door and opener and even your appliances. There are many different providers out there and you should study them carefully for their coverage’s and decide which one works for you. The monthly premium on a home warranty varies but is typically $30 to $40 a month depending on your choices. This too can go a long way towards keeping expenses down should a major repair be necessary.
For my “bottom line”, owning a home is a great way to provide for your family on your terms and express your lifestyle and taste as well as provide long-term financial security. It has to be the right time, the right price range and the right home for you when you make the decision. If home ownership is for you and your home purchase is well thought out and planned for with a budget in mind, you should do fine. This process should be no different than looking at a property to rent. You still have to have a deposit and the money for rent each month. The only difference is you’ll have to plan a little longer for the down payment for your home but there is nothing wrong with that that is part of your investment strategy.
I am here to assist you with your search or sale of a home, so please feel free to contact me.
