By Jake Breen
In America, homeownership has always been considered a lofty goal, a dream that millions upon millions hope to make real. However, before these would-be buyers find homes, they usually rent. In the age-old rent vs. own debate, each generation seems to have its own idea about what is right. Baby Boomers tend to ask, “Why rent when you can own?” And millennials typically assume it’s always better to rent than own, at least when you’re first entering the job market and disposable income is limited. As rates of homeownership fluctuate, economists look to these differing ideologies to try to figure out just where America stands.
So, when is it better to rent than own? In the long run, it’s always better to buy. Buying a home is an investment in your future. However, many factors come into play when purchasing a home including timing and local market conditions.
For example, I’m from Salt Lake City and sometimes I wish I had a crystal ball—and a time machine—so I could transport everyone back about eight years and tell prospective buyers and sellers exactly what to do. In 2007, at the peak of the market, I would have told sellers to put their home on the market, especially with Salt Lake City homes selling for a median price of $256,000. Then, in 2012 at the bottom of the market, I would have told those renters that the time is right to find a home, with properties in our area selling for a median price of $190,000. So, whether you were a renter looking to buy or a seller, timing your purchase perfectly with the market—selling at the high and buying at the low—would have put you a few dollars ahead. Sounds good, right? Now, let’s return to reality: No one can possibly do this.
But if you can’t predict the future, how do you know when the time is right to buy? My answer: data.
Look at key market statistics—or ask your agent to send them to you—in order to determine if you should buy right now. As an example, every January in Utah, our foremost economists come together to forecast the residential real estate market for the upcoming year. In the latest report for 2015, analysts assessment of median home price, income and other relevant factors determined that, if you’re a buyer in Salt Lake County, homes are at an affordable price point. This affordability is juxtaposed with local rents that have increased for four consecutive years.
Basically, if you’re thinking about whether to rent or buy in Salt Lake City, it’s a much better decision to buy. And with similar market conditions around the country, I bet that answer applies to your city as well. All you have to do is ask …