Owning a home, a goal sought by most people, makes up the biggest slice of the “American Dream” pie. Buying a home has lots of advantages, both emotional and financial. Owners get a feeling of fulfillment and accomplishment when they move into their own home, regardless of whether it is their first home or not. Under normal economic conditions, owning a home also makes financial sense. The annual interest paid on the mortgage is tax deductible, and the owners build equity over a period of time. Renting, on the other hand, does not provide any tax breaks or the opportunity to build equity.
However, during economic downturns such as the current recession, jobs are shaky, money is tight, and consumer confidence is low. In such bleak times, home ownership typically goes south and the number of people renting versus owning goes up. Since owning a home is considered the biggest investment an individual makes in their lifetime, renting a house becomes a popular option during tough because of the flexibility it offers to people as they may be required to relocate quickly in search of a new or better paying job.
Last month, Trulia, a website for homebuyers, sellers and renters, released its latest Rent vs. Buy (RVB) Index which found that it is now more affordable to buy than to rent a two-bedroom home in 72 percent of America’s 50 largest cities. Ironically, despite being a buyers’ market, more Americans are choosing to rent either by choice or because of financial troubles. Buyer hesitation continues, even as foreclosures continue to rise. Industry analysts expect renting to become more common for the foreseeable future because in addition to potential buyers, former homeowners are also flooding the rental market.
Realtors may consider it a sliver of good news to learn that according to the RVB Index, renting is only less expensive than buying in four of the cities included in the study – namely New York, Seattle, Kansas City and San Francisco. The remaining 10 cities are locations where buying may still be a financially sound long-term decision despite the relative affordability of renting. Other than investors, lifelong renters are the only ones cashing in on the opportunity to become homeowners.
Many cities in Florida and parts of Central Florida that are overwhelmed by foreclosure filings and unemployment continue to favor prospective buyers not only in terms of affordability, but also in terms of availability.
