You’ve heard the expression countless times: Paying rent is like flushing money down the toilet.
I get it. There are strong reasons for purchasing a home. I’m a homeowner and can attest to the fact that it provides my family with more stability, knowing a landlord can’t kick us out. Purchased at the right time and in the right place, a home can also prove to be a solid long-term investment.
But lately, the case for renting has been strengthening. If you prefer a transient lifestyle with no intentions of staying put for many years, don’t like mowing your own lawn, have bad credit or all of the above, home ownership is probably not right for you…at least, not right now.
But you already knew this.
If you need more convincing, here are some additional talking points. Feel free to fire them back at home-owning friends who throw you shade.
You can stay more liquid during hard times
Bank deposits – both in savings and checking accounts – have been rising. Thanks in part to a strong job market, some of us now actually have a little money to tuck away. Are we all saving for a home down payment? I suspect not. Consumer confidence is weakening. We’re worried about health care costs. We’re not sure where the stock market is headed. The Dow Jones Industrial Aveage is up more than 60% since 2012. How much higher can it go?
For many of us, we’re saving because we’re not sure what’s around the corner. If you want to stay liquid to better manage possible tough times ahead, tying your money up in real estate may not be the wisest move right now.
There’s no “buyer’s remorse”
If you don’t love the apartment you’re renting, good news: You can leave. You can either wait until your lease expires (usually within a year) or you can find someone to sublet your place. Worst case scenario, you can try to break your lease. You may lose money in doing so, but you can get your freedom back faster than trying to sell a home that you don’t like.
And that’s the reality for many home buyers today. A new survey by Trulia found that 44% of Americans have a regret about their current home or the process they went through to when choosing it. One in five say a housing purchase mistake they made in the past is now holding them back from changing their current housing situation.
The cost benefit of owning isn’t as strong
Is owning a home financially better? That’s the conventional wisdom, but the numbers aren’t stacking up as high. Trulia Economist Cheryl Young told Money Magazine recently that, “the economic benefit has narrowed to the point that in some places, for some households, the decision to rent or buy a home may be too close to call.”
That’s because rent prices have plateaued in many markets, while home prices and interest rates have been rising, she continued.
To crunch the numbers and get a personalized breakdown of whether it’s financially beneficial to rent or buy in your neighborhood, check out rent versus buy calculators at Realtor.com and Trulia.com.
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Farnoosh Torabi is America’s leading personal finance authority hooked on helping Americans live their richest, happiest lives. From her early days reporting for Money Magazine to now hosting a primetime series on CNBC and writing monthly for O, The Oprah Magazine, she’s become our favorite go-to money expert and friend.