There is no denying
that home ownership can have its advantages: It
helps build wealth through accumulated home equity and appreciation,
provides tax benefits and offers a sense of autonomy. But sometimes
remaining a renter—and roughly 30% of American households fall into
this group—makes more sense, especially if you fit one or more of these
1. Your finances are a little shaky.
Buying a home means handling sizable expenses up front—such as the down
payment and closing costs—e ven before you start making mortgage
payments. And other costs—including maintenance, insurance and property
taxes—can rise sharply each year. Many couples, like Krystyna Hall and
her fiancé, John Pettengill, of Tarrytown, N.Y., have decided to
temporarily put off buying while they save up. “We want to have a
decent down payment,” says Hall, 34, vice president of a public
relations firm. This strategy might position them for a more favorable
mortgage when they do buy.
When you factor in the after-tax costs of ownership, “in some places it
is better to rent than to buy,” notes Mark Obrinsky, chief economist
3. You don’t plan to stay long in one place.
you’re likely to be peripatetic and moving within five years, you
shouldn’t buy a house unless, maybe, your company pays for the move,”
says Jonathan Pond, a money manager from Newton, Mass. Five years is
the minimum amount of time typically needed to recoup the initial
purchasing costs and deal with housing-market fluctuations.
If you’re looking for the best return, you’re often better off
investing on Wall Street than Main Street. A study by the Fidelity
Research Institute found that real estate produced returns above
inflation of just 1.35% a year vs. 5.95% for stocks from the fourth
quarter of 1963 through the third quarter of 2006.
Being king of the castle means added responsibilities that cut into free time. Most renters need only call their landlords if they have problems with leaky plumbing or broken furnaces, saving themselves time and money. “A lot of us don’t want to spend our time fixing toilets,” says Jonathan Pond.