Rent vs. Buy: Do the Math and Then Ask Mom

We are starting to hear from real estate professionals that a growing number of purchasers are young adults being persuaded to buy now. Who are the people selling them on the American Dream? Their parents! It seems that parents of some adult children are strongly suggesting that their children take advantage of the low cost of homeownership available today. Some moms and dads are helping financially and are even co-signing for the mortgage.
At first, we found this to be rather surprising. However, after thinking about it, it made complete sense. Here are the reasons why.

Do the Math

Let’s look at the financial aspects of renting vs. buying. With house prices falling and rental prices rising in many markets, the possibility that owning a home could cost less than renting one is growing.
In an article from CNN Money earlier this week, they looked at this issue as we move into 2011:
Perhaps not surprisingly, it makes more financial sense to rent than buy today in many U.S. cities…
But that may finally be about to change. Moody’s chief economist Mark Zandi expects the trend to reverse this year in many major cities.

“By mid 2011 and certainly by end of 2011, buying will be superior to renting in most parts of the country,” Zandi says.
(See the ratio in certain markets here.)
As one person said to us recently: “Rents are like adjustable rate mortgages. They adjust often and most times they adjust upward!”

Talk to Mom

Middle age parents who have owned a home understand its true value. A home has always been a good long term financial investment. However, homeownership also has many other benefits.
As a matter of fact, Fannie Mae just came out with their National Housing Survey which asked the question directly: Is this a major reason to buy a home?

The study broke up the answers into financial and non-financial reasons. The top four reasons and six of the top ten reasons were NON-FINANCIAL. The top four are below:

1. It means having a good place to raise children and provide a good education.
2. You have a physical structure where you and your family feel safe.
3. It allows you to have more space for your family.
4. It gives you control over what you do with your living space (renovations & updates).
Should this surprise us? Aren’t these the same reasons our parents bought their home? Aren’t these the same reasons we purchased our home?

These are the same reasons parents have suggested their children buy a home. They want the same things for their grandchildren that they believed to be important for their children.

Bottom Line


Now that the craziness of this housing market is beginning to show signs of settling, people are getting back to the core values that families have always embraced. Homeownership is definitely high on the list.





Reprinted from KCM Blog