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July 24th, 2008
Over the Long Term, Owning is Better than Renting

In today’s market, an increasing number of savvy consumers are asking themselves whether they should rent or own a home.The San Marcos Area Board of REALTORS® advises that while there are many factors to consider in deciding whether to buy or rent, the most important questions to ask are:

“Can I afford to buy?”

“Is homeownership a good investment?” and

“How long do I plan to stay in my home?”

“The answer to the first question may well be that you can’t afford NOT to buy”, Margaret Ennis, SMABOR President said. “None of the money you spend on rent is returned to you, either through savings or as an investment.”

“Homeownership, on the other hand, has tax advantages over renting. And homeownership allows you to leverage your money,” Ennis said.

When considering the investment value of a home, think about this: Dollar for dollar, the rate of return on an individual’s cash downpayment on a house is substantial. Buyers typically use their own money to cover only a small portion of the purchase price, but the home appreciation they realize is based on the total value of the property.

Homeowners benefit from the power of leverage. Over 10 years, a $10,000 investment in the stock market at a normal 10 percent market rate of return would yield $23,600. The same investment as a down payment on a $200,000 home at a normal appreciation rate of 5 percent would return nearly five times the average stock market return, at $110,300.

Ennis points out that homeownership is how many American families begin to accumulate wealth. “According to data from the Federal Reserve Board, a homeowner’s net worth is 46 times that of a renter’s.

However, if you are planning to move fairly soon, you may want to consider renting,” she said.

“Housing is not a quick-in, quick-out investment. When purchased for the long term, housing is one of the safest investments consumers can make. In addition to the savings accumulated through a buildup of equity and tax advantages, a home provides shelter. No paper investment provides this benefit,” Ennis said.

“Of course, homeownership is not just about money. Homeownership provides shelter and security to families, and fosters involvement in community life as well as participation in democratic institutions. Homeownership also provides important social and economic benefits. It is the cornerstone of a healthy community and the basis for positive community involvement,” she added.

Consumers who are considering buying a home should contact a REALTOR® in their local market, who can help them begin to build their future through homeownership. To find a REALTOR® here in San Marcos, contact the San Marcos Area Board of REALTORS® by going to WWW.SMABOR.COM.

Submitted By: Amy DuBose, AE
San Marcos Area Board of REALTORS®

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0 thoughts on “Over the Long Term, Owning is Better than Renting

  1. We all want a place to call “home” but that doesn’t mean one has to “own” the domicile. I just heard an ad on the radio sponsored by the national Board of Realtors saying on average home ownership provides a doubling in value every 10 years. Well, most of the people I know do not experience that kind of dramatic rate of return. And, for my wife and I personally, after just selling our house in Plano that we bought new 16 years ago (well, we are supposed to close in August, it’s supposed to be a “done deal” at this point), we now have 3 different homes we’ve owned in our lifetime (to-date!) that have definitely not provided anything approaching that kind of financial return. Yes, we know people in California and Florida who happened to be in the right place at the right time and make beaucoup money.

    Will we buy another home? Yes. Will we want to spend as much money on the new home? No. Are we concerned that too much of one’s net worth tied up in a home is ill advised? Yes.

    I know some of this may be interpreted as less than cheerleading for economic development, but I’m starting to realize new perspectives on what’s important in life. Providing for the family, raising up our children as best we can, putting food on the table, having hope for the future, participating in our community, all of this requires good jobs and economic growth. Let’s especially celebrate the businesses that are here, and think about ways we can help them be more successful, which can mean goodness for their employees and everybody in the community.

    Having said all of that, let me also be clear to communicate, we love San Marcos and we are so glad to be here!

  2. I hope the realtors take heed and realize that home ownership also means, “if you buy not for ‘your’ primary residence but to rent, R1 restrictions are still enforced. Or at least should be depending on who you are in San Marcos. Lets keep family neighborhoods just what they are supposed to be ‘Famliy’friendly.

  3. “Affordable housing for everybody” – anybody have stats on how many citizens are “priced out” of home ownership in San Marcos? Many students graduating from Texas State University would love to stay in the area, but they need an affordable (decent) place to live, along with a way to earn a living. Is affordable housing totally up to the private sector, or is there a role for city and/or county government to play in helping provide different ways for people to establish long-term roots in the community? How does “affordable housing” fit into the city’s visioning plans (and translate into annual and capital budgets)? I know, lots of questions …

  4. Sadly, there is no housing that I can envision which is going to be affordable to own for people working at the outlet mall and there are few college graduates who are going to want to stay for those jobs.

    There are some good jobs in San Marcos, but not many. Certainly not enough to employ a significant portion of the students who graduate each semester and even fewer for those of us who have progressed up the corporate ladder.

    This is straying a little off topic, but it all goes hand in hand and I wasn’t the first to broach the subject (thanks Steve), so I feel ok commenting along these lines.

    IMO, encouraging home ownership requires a holistic approach which includes more careers (not just jobs), better relations between the city and the university, better schools and strong support for current homeowners and neighborhoods. Encouraging home ownership requires providing the means and the motivation for individuals to make long-term investments in the community.

  5. When I bought my first home in Austin in 1993 I was able to save up the down payment by driving an older vehicle, not having a cell phone, not having cable and not going out as much. I bought an old home that needed a lot of work and I learned a ton fixing it up. Then sold it at a great profit. It never occurred to me to look to the government for a solution. And Steve, Texas A&M web site has a “Housing Affordability Index” that shows the relationship between median home price and median wage.

  6. The trouble with “affordable housing” in San Marcos, is it gets leased out to party people. With their noisy open windowed, subwoofered cars and late night parties, they degrade the life-style of everyone around them. It seems that the when it comes to subwoofers, the city is not willing to raise the fines dramaticaly like they did in San Antonio. As for the house parties, until it is stopped, large portions of San Marcos will aways be a less desirable place to own a home no matter what the price.

  7. Tyler, that is exactly what I mean by “strong support for current homeowners and neighborhoods.”

    If the city is serious about attracting more homeowners, they can’t allow other larger groups to continue to ride roughshod over the few homeowners that are already here.

  8. It will be interesting to see if the SMABOR will begin to show some support for the neighborhoods in some of the challenges that we currently face.

    To date, I cannot recall them speaking on our behalf at City Council yet. Certainly not at any of the meetings where I have spoken.

  9. Way to say it Phil. Why is it the young generations (along with others)seems to think that you are suppose to buy a home as soon as you get out of college?

    I wasn’t able to buy my first home until I was in my early 30’s. Buying a home comes with alot of financial responsiblity. I just had to replace 2 HVac systems in my primary home. And why is it that half the people in this country think that the government is suppose to help me afford my mortgage or rent. It’s called staying single and working 2 full-time jobs to get ahead and make something out of your life, and being proud that you were able to do it yourself. I will never understand this “instant gratification while the government helps you” generation.

  10. I’m with Phil and Melissa. Government involvement can only lead to price increases, tax increases, rationing, and more and more intrusive nanny-state tactics – for example: maybe you can only qualify for gov’t “assistance” if you agree to only use those newfangled, mercury-filled, hazmat lightbulbs. Or maybe have a remotely controlled regulator on your thermostat!

  11. You guys should charge people when you print their news releases without at least editing them to look like a story. It’s just free advertising for them. I’m 25 and in grad school I don’t plan on buying a home for a long time…and a lot of people who shouldn’t have bought homes were scammed into doing so and it almost derailed our national economy.

  12. I worked 7 days a week, most of them long hours, for quite some time, for us (my wife and our first daughter) to get into our first house (home ownership) in Houston back in 1980. I come from a very modest background (grew up in Corpus Christi with no air conditioning, how about that, but we always had food on the table and loving parents). No silver spoon here. My earlier questions (on “affordable housing”) may benefit from further clarification and dialog.

    I respect the right for people to take the stance that the government should have nothing to do with whether a family can afford to buy a house, but I also know there are many years of people and organizations working to enable more families to own their own place to live.

    What are some ways the government might help set the stage for affordable housing to become more available? Well, for example, you can deduct the interest you pay on your home mortgage from your federal income tax. That’s a form of “government subsidy” that everybody here who has or does have a mortgage on a home is enjoying right now every day of the year.

    I read on the Internet this evening that “affordable housing” is a broad term, “used to describe decent, safe housing which is affordable for individuals who, generally, earn less than 80% of the Area Median Income (AMI).” I also read about “Low Income Housing Tax Credits” being defined as incentives, “for individuals and corporations to invest in affordable housing. By investing in affordable housing, investors can reap great savings on annual income tax liabilities. The LIHTC is the most widely used, most productive, and most successful affordable housing program in the country.”

    Many people in Central Texas are concerned about affordable housing. Earlier this week I saw here on Newstreamz that, “Improving the transportation system, water availability and quality, maintaining the affordability of housing, the lack of planning resources and the need for greater coordination on regional issues are among the top concerns of Central Texans, according to a new study about planning for future growth released by Envision Central Texas (ECT).”

    Yes, I believe in personal responsibility and limited government, but there are some societal needs which require sound government policy. In terms of “government involvement,” I sure wish we had been able to exercise more control with all these financial institutions that have misbehaved and now are asking for government guarantees and bailouts. Talk about a strange mix of individual people getting to make lots of money for their mistakes and then the taxpayers get to foot the bill … this may sound far away from San Marcos, but it reverberates throughout all levels and areas of the economy.

  13. I believe our current mess tells us the “you can’t afford NOT to buy” line may not always be true. Note, the term “affordable housing” does not mean “houses” for everybody.

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