It does not take more than a minute (if you do a search on Google™) to find a blog or article written by a REALTOR® which extols the virtues of buying a home. And there is a better than even chance that “Now is the Time To Buy” will be included in the first paragraph or title of the article.
With this in mind, I thought I would write about the counter argument, why Now Is Not The Time To Buy A Home. You see, I believe that buying a home is not the right answer for everybody. There are many reasons and many times that home buying should be avoided, and the following list covers the primary reasons:
- You Love The Home You Are Renting
- You Plan On Moving In The Next 3 Years
- You Have No Money In Savings
- Your Employment Situation Is Shaky
- You Spend Most Of Your Time Out Of Town
If you find that any of these categories really fit your current situation, then now might not be a good time to buy a home.
You Love The Home You Are Renting
If you love the home in which you live, and you think your rental terms are fair, and you have faith that these terms will be extended to you indefinitely, then I think you would be crazy to move. The most important reason think your home rental or home purchase should do is maximize your quality of life. If you are happy, stay.
Relocating Within The Next Three Years
There is a cost of home ownership that is above and beyond the purchase price. We refer to these as “real estate closing costs,” and you have them when you buy, and you have them when you sell. The normal break-even point usually occurs after owning the home for 3 to 5 years, so if you are positive you will want to sell within the next three years, most likely home ownership is not the cheapest solution.
Of course, now that we have the Homebuyer Tax Credit, that should be taken into consideration as well, but I suspect anything under 3 years of ownership will cost more than an equivalent rental opportunity (if there is an equivalent rental opportunity).
Limited Funds In Savings
There are a few reasons why somebody with little or no savings should not be buying a home. The primary reason is the difficulty in obtaining financing. Most loan programs these days require the home buyer to have some “skin in the game,” meaning they do not want to make 100% financing available anymore. But that doesn’t mean it cannot be found ….
Another reason to consider having financial reserves before you buy a home is that as the homeowner, repairs are all yours. There is no landlord, no property management company, no on-call service manager to turn to if something should break. Everything comes at a price, and your mortgage payment will not include a “mark up” to cover the cost of repairs.
You can look at a case study about the cost of renting versus the cost of buying a home to get a better idea of what all these costs will be.
Concerns About Your Job
If you are worried about your job, or you think that your employment is on shaky grounds, now might not be the best time to buy a home. When you commit to owning the home, you want to know that you will be able to handle the monthly payments through any chaos in your life.
A solid job also ensures that you will want to live in the same community for years to come. The real financial benefit to home ownership comes over the long-term, when equity begins to build and your fixed monthly payment stays well below rising rent payments. Without stable employment, these long-term benefits might not be realized.
You Travel A Lot For Work Or Play
If you spend most of your time out of town (and you do not have a spouse or partner who remains in town), then owning a home might be costlier than leasing one. I love owning a home because it is a place to call my own, but if I traveled all the time, I wouldn’t be spending any time there. The joy of ownership requires a certain amount of use, otherwise, it is just shelter and lodging for when you are in town.
Reasons Not Mentioned
So we covered the primary reasons why you should not buy a home right now, but here are reasons that I hear all the time that I think are not valid. If you are thinking about buying a home, and none of the factors above are a concern to you, don’t let the following stop you!
- Bad Credit – This is not a reason to wait to buy a home. There is “more than one way to skin a cat,” and there are options for people with damaged credit.
- Knowledge – Just because you do not know how to buy a home in your current situation does not mean it cannot be done. Spend some time on the Tallahassee Real Estate Blog and you will learn quite a bit. Then hire the best real estate company in your area and trust in their guidance.
Quality of Life Is The Key To Housing
The most important thing about choosing your home, whether buying or renting, is quality of life (or lifestyle). Some people cannot find the proper home in the rental market and thus do not make cost the primary factor when choosing a home. Whether buying or leasing, make sure you know where you are and what you want.
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You make great points here. It takes an agent who cares about a clients well being to bring these questions to light. Agreed! Now is not necessarily the time to buy.
Thanks Beth,
It’s not so much now is or is not the time to buy, the real estate issue that I hope I’m expressing is that individual situations mean more than does the market.
It’s always fun to play devil’s advocate, and Mark Twain proved that this can be done elegantly. I was disappointed to discover serious fundamental flaws.
The arguments against buying have to take place at a small enough scale that there’s a difference between renting and buying (or other alternatives such as homelessness, for that matter), but the article ignores the financial impact of renting at that small a scale.
Understandably, this is a blog focusing on Florida real estate, where the subtler points have been painted over in giant red strokes with the notice: “All bets are off!” All bets are off indeed. Florida real estate investment advice on the rent vs. own debate could perhaps be more directly summarized with “Get out while you still can!”
Except for the microcosm here and there where real estate speculation went all the way past reckless on into ridiculous, real estate may have fallen and may settle further as shadow inventory continues to weigh on the market, but historical trends seem to suggest that a bubble has recently popped.
Building equity slowly is not the same as donating monthly to the local starving landlord foundation.
Quality of life is indeed central to the housing equation. But housing choices also have a financial component. Investing in a rental home is limited to luxuries, whereas investments in a primary residence, made prudently, can generally be recouped if the home is sold later. The person in the home can make upgrades without wasting valuable funds.
And then there’s the Homebuyer Tax Credit, weighing in at $8,000, several months worth of rent. FHA loans are still available to those with as little as 3.5% down payment and lower credit scores.
Rental costs do indeed include a markup to cover maintenance costs. Somehow, this is portrayed as an argument *in favor* of renting. Landlords collect those costs each month, whether money is spent on maintenance or simply pocketed.
Buying a house means committing to making payments no matter what financial chaos comes up. But how is that helped by renting? Are loan modifications going to help renters? A homeowner has to keep up payments during financial hardship… but rent is no more gratis during those same hardships.
For those who travel frequently, a small home with more scaled-back amenities can be purchased as readily as it may be rented.
The underlying problem with most of the arguments against homeownership is the tendency to point out liabilities and disadvantages, without considering whether those same factors exist for renting in a transmuted form. Touting renting as a solution rarely addresses any of these downsides, and the costs can be far greater.
One would think the educated minds in the financial world would be able to see that from the outset.
Great points Joe! When we bought in 2006 we wanted our mortgage to be comparable to rent. We bought our small 3/2 home and pay just $850 a month, which is appropriate for our budget and family size. However, I WISH we would have been more willing to look at condos/townhomes, so that we could have had an even smaller mortgage. Something CHEAPER than rent. Because maintaining a home can sure get pricey quickly. And unfortunately in today’s market, you cannot always recoup those maintenance costs when you sell.
For example, we are looking at building a retaining wall because of serious erosion issues (thank you Tally rain), and patching a roof (hopefully not replacing it!) It certainly won’t mean anything to future buyers because we HAVE to have a roof, or the place will flood, and we HAVE to deal with the erosion, or the home will wash away. It doesn’t appear in this market that we could up our selling price to reflect what we have paid into maintaining our home. I think people ignore that much of the time.
Anyway…
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