Why You Shouldn't Buy a Home
Real estate agents are notorious for spouting the same bullsh...er, cliches that always amount to the same message: "you should buy a home!"
That couldn't be further from the truth.
As an important mentor of ours said, "There's always a time to rent. There's sometimes a time to buy."
Let's explore that a bit.
How many homeowners are there in the US?
The more statistic-y and accurate way to ask this would be, what is the percentage of homeownership across U.S. households?
Since 1964, about 65.3%. Guess when it shot up closer to 70%? Yep, the run-up to the 2008 housing crisis, when "NINJA" loans (No Income, No Job verification) were backflipping their way across America and roundhouse kicking the housing market in the crotch.
All that to say, there's always been a large number of folks who rent rather than buy, and that is not a bad thing. In fact, if homeownership percentages start to creep up again, that's a sign that something's gone wrong.
To those 35+% of households who rent, you may be exactly where you should be for now.
When renting makes sense.
You might move soon. Buying and selling a home costs money. If you think you might move again in a couple of years, renting may make more sense.
Buying would use up all your savings. Just because you have enough for the down payment doesn’t necessarily mean you’re ready. You should still have some money left over after you buy.
The payment would stretch you too thin. The amount a lender says you can afford and the amount you’ll actually be comfortable paying can be two very different things.
Your income isn’t very predictable right now. If you’re changing jobs, starting a business, going back to school, or just aren’t sure what you’ll be earning next year, it might be better to wait.
You’re not sure where you want to live. If there’s a good chance work or life will take you somewhere else soon, there’s nothing wrong with renting until things become clearer.
You feel like you’re falling behind by not owning. Seeing friends buy homes—or watching prices go up—can create a lot of pressure. That alone isn’t a good reason to buy.
You don’t really want to take care of a house. Things break. Yards need work. Furnaces die. Roofs eventually need replacing. There’s nothing wrong with preferring to have a landlord deal with that stuff.
You don’t really like the homes you can afford. Buying something you don’t want just so you can say you own a home may not be worth it—especially if you’ll want to move again as soon as you can afford something better.
Renting is a much better deal where you live. Sometimes the rent on a house is simply a lot less than what it would cost to own that same house. In that situation, renting can make perfectly good financial sense.
You have more important things to do with your money right now. Paying off expensive debt, building up savings, or getting your finances on firmer footing might be more important than buying a house.
The numbers only work if the house goes up in value. Home values generally rise over long periods, but they don’t have to rise next year—or even over the next several years. You shouldn’t need rising prices to bail out a purchase that otherwise doesn’t make sense.
You’re thinking of your home only as an investment. A home can absolutely help you build wealth, but you’re also buying a place to live. The financial return isn’t the only thing that matters.
When buying makes sense.
Obviously, we're a fan of home ownership. It's what we help people do day in and day out, and how each of us on the team have been able to keep living in this place we love, and grow more financially stable over time. In fact, in each of our cases, we househacked our way into our first homes (which you can read more about here) to offset our housing expense and make the numbers work.
The argument for buying a home is basically when your situation is the opposite of all of the bullet points above. You know you're going to be in the home for awhile, you are stable financially, and you want to make a place your own and start building equity.
Part of our job is to help people think these things through. There have been so many times that we've met with people who think they'll never be able to purchase a home, only to find out they're very well-positioned to do so. Conversely, we meet with folks who are gung ho to start touring properties, only to find out they'll need to hold off until they get more of their ducks in a row.
The point is, you don't have to figure this out on your own. Between talking with a good agent (like us. It's just true, we're very good at this) and a good lender (we work with the best and would love to introduce you), you can get a complete lay of this land to decide what's best for you.
We'd love to talk when the time is right.
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