Dreaming of owning your own home is close to the heart of many American families. The problem is that it might not be the best thing to do anymore. For as far back as any of us can remember, being the proud owner of a home meant you were building wealth rather than paying rent to someone else and funding their lives.
The immense damage to the economy in the historic housing crash between 2006-2011 changed the minds of many Americans. In 2020 the cost of homeownership is outpacing the cost of renting across most of the United States and the COVID-19 pandemic will cause more havoc before the vaccine is universally available or it burns out.
As the ongoing effects of the global pandemic continue, we are witnessing massive unemployment and job uncertainty with businesses going under all over the place. However, for those who are still working, and for those who are now dealing with children doing home-schooling, many have realized that they can continue to work from home and are looking for bigger properties with a home office space and a larger yard for the kids to play in. No more long, tiring commutes, just a hard-earned cool drink at the end of the day looking out off your balcony.
To buy or to rent, that is the question.
The buy vs. rent index, first published in 2013, shows that even when home prices are rising as they are in the USA today, renting is still a good option and can be just as, or at times even more lucrative, for disciplined investors.
The fact that we are living through an unprecedented period in history where one of the world's largest economies has been effectively shut down, it is incredible to think that house prices have remained as robust as they have done. Being cautious about a large purchase during the best of times is normal but during times such as these, it’s wonderful to see many still buying homes. It could be considered making the biggest investment of their lives. During the last recession, we saw a fall in house prices in the US and other countries.
Research showed that Atlanta, Dallas, Denver, Houston, Kansas City, Miami, Pittsburgh, San Francisco, Seattle, and Portland were all displaying home prices far higher than their long-term fundamental home price levels. In these areas, renting is the better option. No matter whether you own or rent, make sure you do the research and find out what fits your lifestyle and financial goals best.
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.
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