buy a first house or rent?
Here's a good give-and-take on whether it's smart for first-time buyers to make their move--or really, really not.
The case for the defense (of buying):
Affordability is the best it has been in 30 years, thanks to the
combination of a 34% decline in prices since the 2006 peak and a
historically low 4% average rate for a 30-year, fixed-rate mortgage... The two affordability metrics that truly matter are how much monthly
income a mortgage consumes, and whether this is less costly than
renting. On the first count, I calculate that home prices are now an
astonishing one-third cheaper than the historical norm. On the second,
real-estate website Trulia figures that buying is cheaper than renting
in 98 out of America's 100 major markets.
And for the prosecution (of a still dangerous market):
Sure, the always optimistic National Association of Realtors tells
you that based on mortgage rates, incomes and house prices,
single-family houses have never been more affordable. But according to
their index, that was also true in December 2008, and prices have fallen
9.2% since then. Ugh! Home prices may have dropped 34% since the peak
in early 2006, but that doesn't make them cheap if prices continue to
decline... Yes, apartment rental rates are rising and vacancies are falling, but
by past standards, house prices remain high relative to rents. But even
if homeownership was cheaper than renting, as some claim, buying a
house now would be a disastrous investment if prices fall another 20% or
more... The homeownership dream of an appreciating asset and huge ATM has
been replaced by the nightmare of a liability that is expensive to own
and falling in value. Act accordingly.