In Austin, rent vs. buy debate heats up
By Shonda Novak, Austin American-Statesman | |
McClatchy-Tribune Information Services |
"A home is the farthest thing from building equity; it's one of the greatest expenses known to mankind."
I've wanted to get those contrarian nuggets from Patrick Bet-David, a financial advisor formerly with
Bet-David casts a skeptical eye on the so-called "American dream" of homeownership. Bet-David, president and chief executive of
Bet-David's soap box, along with two recent conflicting studies on renting vs. buying, got me thinking anew about the rent vs. buy dilemma many people face and its ramifications in a market like
While arguments can be made both for buying (building equity, locking in your housing costs, getting a mortgage-interest tax deduction, etc.) and renting (more flexibility to move, no property taxes, homeowner's insurance or repair and maintenance costs), I asked some housing experts their for views and advice.
They say the choice generally boils down to individual circumstances -- financial and otherwise -- lifestyle preferences and other variables.
"When someone asks me whether they should rent or buy, my first question is always: How long do you plan to live in your next home or apartment?" says
Local market data is key in making the decision, Rude said. In
From 2003-2013, the average home price in
The average rent citywide now tops
None of that would sway Bet-David, who says he has never owned a home.
Bet-David insists he's not pessimistic about home ownership. It's just that American's spending habits have gotten out of balance, having shifted from an era when people bought on cash to now financing purchases from wedding rings to cars and houses. He says the true American dream is not about owning a home, but about entrepreneurship -- the ability to start and "build it as big as you want and become financially free."
No matter which side of the argument you take, you can find data to support your position.
In a recent analysis in
But another study came to the exact opposite conclusion. In its latest "rent vs. buy" report,
Why the disparity with the
"And using the assumption that buyers will get a 4.5 percent mortgage rate on a 30-year fixed-rate loan with 20 percent down, are in the 25 percent tax bracket and will stay in the home for seven years, buying a home is actually cheaper than renting in the 100 largest U.S. metros," Buhler said.
Of course,
In the real world, of course, the rent vs. buy decision involves real dollars. And that was part of what led Austinites Mike and
The Baldwins sold their 2,500-square-foot home in November and headed east, downsizing into a brand new upscale apartment with 1,400 square feet overlooking
Among other costs, they said, the move eliminated expenses for lawn care, upkeep on an older home, homeowner's insurance, payments on a home improvement loan and a
The Baldwins estimate they are saving about
They also say the decision to rent has opened up new experiences as they sample life in an up-and-coming area along
"It was kind of like a reset in
"We didn't realize how much time we spent on home chores and maintenance projects that we now have free," she said. "We use some of that to explore our new neighborhood and search out the hidden gems, like the trails, services and restaurants. It gives us an entirely new perspective on the city of
While you can make arguments for either renting or buying, local real estate consultant
"Every homebuyer or renter has to make a choice about what's best for their circumstances, and rent vs. buy is only one aspect of a person's lifestyle," Heimsath says. "How important is minimizing commute time? What is the best school option for my 6th grader? Do I want to live near where I go for entertainment or live closer to my employer? How important is building up my savings account? Where does my girlfriend live?
"All of these factors influence a person's choice of residence, and that choice can be very complicated."
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Cost of shelter
Percentage increase in average
Time period Apartment rents Home prices
2013 8.2% 4.8%
2012-2013 16.0% 20.0%
2011-2013 24.0% 19.0%
2010-2013 28.0% 17.0%
--Includes single-family, condo and townhouse sales
Sources: 360 Real Estate Analytics; Austin Investor Interests; Texas A&M Real Estate Center;
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