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The New Price of Homes in 2012
Here is an infographic comparing prices of home sales and renting. This is an overview of housing prices from the start of the recession in 2008 until now.
Source: foreclosuredeals.com
Conclusion
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Filed under: Financial Planning | Tagged: home mortgages, home prices, Is it Better to Buy or Rent?, shiller index |
The Leading Business Education Network for Doctors, Financial Advisors and Health Industry Consultants 
It appears obvious when viewing the graphics here at first glance that it is still cheaper to rent in spite of home prices dropping dramatically and rents rising dramatically in the past few years. However, there is more to this analysis, especially for those that are thinking about retirement down the road:
In many States the advantage to renting vs. buying is only a few hundred dollars. When considering that the mortgage payment is tax deductible and the rent payment is not the net out-of-pocket favors buying. In fact, assuming a $1000 mortgage payment with a 25% tax bracket, the actual mortgage payment is $750. This puts buying actually cheaper than renting in many States on an after-tax basis.
More importantly, consider the long-term financial planning consequences of renting vs. buying: After 30 years you own the home when making a mortgage payment. After 30 years of making rent payments you still get to make continued rent payments. Do you really want to be making rent payments in retirement?
Approximately half of all Americans age 65 and over have only Social Security for income. When you consider the average SS monthly check for an individual is in the $1,000 to $1,500 range, the cost of renting
can easily take up half the income, or more.
Of course, there are many other issues to look at when considering renting vs. buying. Many people cannot qualify now to buy because of damaged credit or unemployment. Many do not have the down payment since the “Nothing Down” days are gone. Nevertheless, if you can overcome these hurdles, owning is still a worthy goal and a definite financial advantage. Sure home prices are going to fluctuate. Who cares if you will own it in 30 years? Throw in a few hundred extra dollars a month and you can own it in 15 years. Now that is “no brainer” financial planning!
David K. Luke MIM
http://www.networthadvice.com
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The housing market was sicker than we thought
Mr. Luke – Real estate agents are famous for putting a listing in the best possible light to close a sale. But recently, the industry’s national trade association confirmed that its monthly data may have been painting a rosier picture of the pace of home sales, since 2007, than actually happened.
http://bottomline.msnbc.msn.com/_news/2011/12/21/9608643-its-official-housing-market-was-sicker-than-we-thought
Sheldon
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Home prices back to 2001 levels?
With values close to what they were in 1989, after calculating inflation, should a home ever again be seen as an investment?
http://realestate.msn.com/blogs/listedblogpost.aspx?post=834cfc52-27b7-487a-94f6-e6f5005d22b8&from=en-us_msnhp
Jimbo
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Buy versus Rent Calculus Changing
Falling home prices have sent many would-be buyers to the sidelines. If all goes well, record low interest rates and rising rents may soon prompt some of them to take a second look at buying.
http://bottomline.msnbc.msn.com/_news/2012/01/23/10217301-home-buying-could-soon-beat-renting
Any thoughts?
Sherman
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