Buy or Rent?

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"Should I buy or rent?" With the housing market steadily improving in the Bay Area and rents continuing to jump, this is a question more and more people are weighing these days. The real estate market has rebounded very strongly from the downturn of a few years ago and many first-time buyers are starting to dip their toe into the homeownership waters. If you're starting to weigh your options, here are just a few questions you might be pondering as you decide whether to buy or rent.

Is it cheaper to buy or rent?

Conventional wisdom is that renting is cheaper than buying a home, and that may have been true a number of years ago when prices were peaking and mortgage rates were much higher. But that's no longer true today. A number of recent studies have put housing affordability at its lowest level in decades! Lower home prices and near historic low interest rates have brought the price of homeownership below the cost of renting the same property in many cases - especially since rents have been soaring over the past couple of years.

Can I afford to buy?

This is a question at or near the top of every potential homebuyer's mind. Buying remains a sound financial decision for those with documented income and a good credit history. A steady income can provide a strong backbone for the initial down payment and future mortgage payments. Along with a financial planner, an experienced real estate professional, like myself, can help you answer and uncover questions about the cost of homeownership.

Is buying a home a sound investment?

With proper planning, a home purchase has historically proven to be one of the safest investments one can make. Along those lines, it is imperative to understand that investing in a home is much different than investing in a stock portfolio. Homes typically appreciate in value over time while the owner builds his or her equity through monthly mortgage payments. If you anticipate staying in a home for only one or two years, it doesn't necessarily mean buying is not for you, but you are less likely to see a significant financial return on your investment.

Isn't renting easier than owning?

It's true that when repairs and maintenance need to be done on a rental, the responsibility falls to the landlord. If you are renting, you might even feel a bit like a homeowner by making routine repairs yourself, but there is one fundamental difference. Unlike equity built with each monthly mortgage payment, the rent you are paying is producing zero future financial benefit. Since most homes increase in value over the long term, a home not only provides a place to live but will ultimately provide return on your original investment.

Has the housing market completely stabilized now?

The Bay Area real estate market has been on the rise for the better part of the past two years with both average prices and unit sales rebounding strongly. In some communities, prices have come all the way back to their pre-recession highs. But there are still great values in many neighborhoods with homes still selling at discounted levels. Add to that interest rates that remain very close to their all-time lows and most experts agree it's a great time to buy.

How can I buy a house when there is so much competition?

We all heard the stories of multiple offers, homes being bid up tens-of-thousands above asking, buyers swooping in with all cash - it's a bit intimidating. The good news is that things have changed. Experts tell us the craziness we saw in the spring and summer of 2013 has calmed, the group of all-cash buyers and investors has thinned out, and the competition has waned. Left now are committed buyers looking for a reasonably priced home in which to live. Prices have leveled and multiple-offers have decreased from months past. Homes are still going quickly though - all the more reason to work with a seasoned real estate agent who knows how to navigate today's market.

The ups and downs of the real estate market have been in the news so much over the last few years that it can be overwhelming for those debating whether to jump into the market or not. I truly believe this is a great time to get into a home for all the reasons above. I'd be happy to talk with you more about your own personal situation and see if this is the right time for you, too.