Youmay be asking yourself, "is it really in my best interest to buy a homenow?" With all of the bleak news about the economy, jobs and thehousing market many of us have thrown our hands in the air and givenup. But when you look at the advantages of purchasing in a market likethis the question isn't really "should I buy" it's "which house shouldI buy?" The Wall Street Journal's article, 10 Reasons to Buy a Home states it beautifully. Here are the top 5:
1. You can get a good deal.Especially if you play hardball. This is a buyer's market. Most of theother buyers have now vanished, as the tax credits on purchases havejust expired. We're four to five years into the biggest housing bust inmodern history. And prices have come down a long way about 30% fromtheir peak, according to Standard & Poor's Case-Shiller Index,which tracks home prices in 20 big cities. Yes, it's mixed. New York isonly down 20%. Arizona has halved. Will prices fall further? Sure, theycould. You'll never catch the bottom. It doesn't really matter so muchin the long haul.
Whereis fair value? Fund manager Jeremy Grantham at GMO, who predicted thebust with remarkable accuracy, said two years ago that home pricesneeded to fall another 17% to reach fair value in relation to householdincomes. Case-Shiller since then: Down 18%.
2. Mortgages are cheap. Youcan get a 30-year loan for around 4.3%. What's not to like? These arethe lowest rates on record. As recently as two years ago they wereabout 6.3%. That drop slashes your monthly repayment by a fifth. Ifinflation picks up, you won't see these mortgage rates again in yourlifetime. And if we get deflation, and rates fall further, you can refi.
3. You'll save on taxes.You can deduct the mortgage interest from your income taxes. You candeduct your real estate taxes. And you'll get a tax break on capitalgainsif anywhen you sell. Sure, you'll need to do your math. You'llonly get the income tax break if you itemize your deductions, and manypeople may be better off taking the standard deduction instead. Thebreaks are more valuable the more you earn, and the bigger yourmortgage. But many people will find that these tax breaks mean owningcosts them less, often a lot less, than renting.
4. It'll be yours. Youcan have the kitchen and bathrooms you want. You can move the walls,build an extensionzoning permittedor paint everything bright orange.Few landlords are so indulgent; for renters, these types of changes areoften impossible. You'll feel better about your own place if you own itthan if you rent. Many years ago, when I was working for a politicalcampaign in England, I toured a working-class northern town. Mrs.Thatcher had just begun selling off public housing to the tenants. "Youcan tell the ones that have been bought," said my local guide. "They'vepainted the front door. It's the first thing people do when they buy."It was a small sign that said something big.
5. You'll get a better home.In many parts of the country it can be really hard to find a goodrental. All the best places are sold as condos. Money talks. Onceagain, this is a case by case issue: In Miami right now there are somany vacant luxury condos that owners will rent them out for a fractionof the cost of owning. But few places are so favored. Generallyspeaking, if you want the best home in the best neighborhood, you'rebetter off buying.
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