Like many who want to live the American Dream, people looking to buy a home are often looking for ways, and reasons, to buy property in lieu of renting. In recent years, a slow economy and roadblocks to loan approvals has proven this an arduous task for many a potential home owner.
Now, as real estate inventory continues to maintain stable levels and mortgage interest rates are at their lowest for 2014, potential home buyers are looking for a reason to move on the home they have dreamt of. Supporting the reasons to buy a home now is a report released late last year by Eric Belsky, Managing Director of the Joint Center of Housing Studies at Harvard University which reviewed several financial reasons for home ownership. (See the entire paper here.)
Renting = No Return on Investment
Let’s face it. You have to live somewhere, right? If you are renting property, you will see absolutely no return on investment when your lease is up or you decide to move. While it can be more economical in the short term, there is no financial gain from it.
“Homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord.”, as Belsky noted in his paper.
Buy a Home to Force a Savings-Mentality
Saving for the future is often difficult for most households. Short term interests and a lack of focus on the effects of long term spending often cloud the ability to save for a rainy day. When a family plans to buy a home, they are forced to look at the real costs of living and develop a budget that includes savings for home repairs, and other home-related costs.
Tax Benefits Follow When you Buy Property
Much like the fact that there is no long-term investment potential when renting, there are no effective tax benefits to renting either. When you buy a home, you are able to deduct mortgage interest and property taxes from gross income, which reduces your overall tax debt on April 15th.
And the future looks bright for families looking to buy a home in 2014. According to an article on Bloomberg.com, the recent gain of 1.3 percent for recent home purchases indicates continued growth potential.
“The number of available properties climbed to an almost two-year high, helping slow the pace of price appreciation.
A pickup in real-estate listings that improves affordability will help bring homeownership within reach of more Americans, increasing the odds the industry will recover from a yearlong slowdown. A gain in home construction last month showed builders are responding to limited inventory at the same time mortgage rates retreat and lure prospective buyers.
‘The improvement in availability suggests stronger sales activity in the months ahead,’ said Russell Price, senior economist at Ameriprise Financial Inc. in Detroit. Price is the second-best forecaster of existing home sales in the last two years, according to data compiled by Bloomberg.”
Realistically, even if the cost to buy a home is a little higher than renting in the short term, the fiscal benefits and long-term investment potential of owning real estate far outweighs the decreased short term costs. With interest rates at a low for the year, now is the time to buy property in the neighborhood where you envision your family making wonderful memories for years to come.