Darren Ahearn
Darren Ahearn
240-317-2722240-317-2722

The TRUTH Behind the RENT vs. BUY Debate – KCM Article

The TRUTH Behind the RENT vs. BUY Debate

The TRUTH Behind the RENT vs. BUY Debate | MyKCM

In a blog post published last Friday, CNN’s Diana Olnick reported on the latest results of the FAU Buy vs. Rent Index. The index examines that entire US housing market and then isolates 23 major markets for comparison. The researchers at FAU use a “‘horse race’ comparison between an individual that is buying a home and an individual that rents a similar-quality home and reinvests all monies otherwise invested in homeownership.”

Having read both the index and the blog post, we would like to clear up any confusion that may exist. There are three major points that we would like to counter:

1. The Title

The CNN blog post was titled, “Don’t put your money in a house, says a new report.” The title of the press release about the report on FAU’s website was “FAU Buy vs. Rent Index Shows Rising Prices and Mortgage Rates Moving Housing Markets in the Direction of Renting.”

Now, we all know headlines can attract readers and the stronger the headline the more readership you can attract, but after dissecting the report, this headline may have gone too far. The FAU report notes that rising home prices and the threat of increasing mortgage rates could make the decision of whether to rent or to buy a harder one in three metros, but does not say not to buy a home.

2. Mortgage Interest Rates are Rising

According to Freddie Mac, mortgage interest rates reached their lowest mark of 2017 last week at 3.89%. Interest rates have hovered around 4% for the majority of 2017, giving many buyers relief from rising home prices and helping with affordability.

While experts predict that rates will increase by the end of 2017, the latest projections have softened, with Freddie Mac predicting that rates will rise to 4.3% in Q4.

3. “Renting may be a better option than buying, according to the report.”

Of the 23 metros that the study reports on, 11 of them are firmly in buy territory, including New York, Boston, Chicago, Cleveland, and more. This means that in nearly half of all the major cities in the US, it makes more financial sense to buy a home than to continue renting one.

In 9 of the remaining metros, the decision as to whether to rent or buy is closer to a toss-up right now. This means that all things being equal, the cost to rent or buy is nearly the same. That leaves the decision up to the individual or family as to whether they want to renew their lease or buy a home of their own.

The 3 remaining metros Dallas, Denver and Houston, have experienced high levels of price appreciation and have been reported to be in rent territory for well over a year now, so that’s not news…

Beer & Cookies

One of the three authors of the study, Dr. Ken Johnson has long reported on homeownership and the decision between renting and buying a home. The methodology behind the report goes on to explain that even in a market where a renter would be able to spend less on housing, they would have to be disciplined enough to reinvest their remaining income in stocks/bonds/other investments for renting a home to be a more attractive alternative to buying.

Johnson himself has said:

“However, in perhaps a more realistic setting where renters can spend on consumption (beer, cookies, education, healthcare, etc.), ownership is the clear winner in wealth accumulation. Said another way, homeownership is a self-imposed savings plan on the part of those that choose to own.” 

Bottom Line

In the end, you and your family are the only ones who can decide if homeownership is the right path to go down. Real estate is local and every market is different. Let’s get together to discuss what’s really going on in your area and how we can help you make the best, most informed decision for you and your family.

Link -> https://goo.gl/AObGCd

Leave a Reply

About Darren Ahearn

Picture of Darren Ahearn

Darren Ahearn

darrenahearn@gmail.com

7210 Corporate Court Suite B, Frederick, MD 21703

240-317-2722240-317-2722 main

240 344 1713240 344 1713 office

240 344 1713240 344 1713 mobile

RE/MAX Results

7210 Corporate Ct. Suite B Frederick, MD. 21703

It’s not about the home, It’s about serving you!

Community Events

Business Networking | Tuesday Morning | Frederick, MD | IHOP

SFN Group (Business Networking) MD, VA & DC

Business Owners! We will meet at IHOP, 7:00am, 2421 Osprey Way S, Frederick, MD 21701. Business knowledge will be passed by Brandon Swisher, Real Estate Agent at Keller Williams Realty Centre.Be open to receiving referrals!  Bring Business...

Frederick Sahaja Meditation Weekly Meetup

Frederick Sahaja Meditation

Let us explore together the inner workings of our empowered self through inner energy meditation. There will be plenty of time for information gathering and discussion. The main emphasis, however, will be on the experience of exploring our inner...

Baker Park Walk

Frederick Walkers

Meet outside William Talley Recreation Center (West side) in Baker Park. We walk to the northwest end of the park and back - a little over two miles. (https://www.cityoffrederick.com/DocumentCenter/Home/View/1740)

Facebook Feed

Darren Ahearn of Remax Results - Some home sellers have asked is selling by owner really worth the effort and time? In many cases the answer is no! When selling alone you limit yourself to a smaller pool of buyers compared to the broader access available to skilled, top producing agents. Zillow, Trulia and Craigslist are just the t ...Read More

6 hours ago

Darren Ahearn of Remax Results - Darren Ahearn of Remax Results shared a link.

12 hours ago