Since the middle of the 20th century, US home ownership has fluctuated between 62 and 70 per cent. However, CNBC says that in the second quarter of 2015 it was just 64.4 per cent, the lowest level since the mid-1960s.
Reasons for such a decline are mainly economic and demographic, including elevated house prices in high-population markets and sizable student debt loans. As a result, more and more people are choosing to head on to Forrent.com and look to rent instead, even though this market is showing signs of slow growth too.
So, is it really best to rent or own? Here are the main pros and cons:
Pros of renting
- Little responsibility – If a pipe bursts or the fridge stops working, simply call your landlord or superintendent to rectify the problem, as it is their responsibility
- Little risk – You will not be adversely exposed to changing economic conditions, which can have a big impact on things like mortgage interest rates
- More flexibility – Relocating somewhere else is a lot easier, less time-consuming, and cheaper if you decide to rent
- All-inclusive – Some landlords, especially multi-unit building owners, will cover the cost of most utilities, which can include non-essentials like cable as well.
Cons of renting
- Lose money – Unless you are entering into a rent-to-own agreement, every cent you pay will be effectively lost, which means you won’t build up any equity either
- No tax benefits – Homeowners are able to deduct property taxes and mortgage interest on their federal income tax returns, but renters aren’t eligible
- Limited control – Despite reduced exposure to the market, the landlord is still well within his or her rights to raise rent once a lease expires
- Limited security – While most jurisdictions prohibit landlords from evicting without cause and notice, there is no law that entitles renters to stay in their property indefinitely
Pros of owning
- Build equity – With most mortgages, a portion of each monthly installment will go towards the loan’s interest, while the rest pays down its principal
- Tax benefits – There are several tax benefits that cater exclusively to homeowners, the most notable being Homestead Exemption and Federal Tax Deductions
- Creative freedom – As long as you don’t break local building codes or homeowners’ association rules, you can do whatever you like with the interior and exterior of your property
- Community spirit – Homeowners are more likely to stay put than renters, enabling them to establish a community presence
Cons of owning
- Financial loss – Equity doesn’t always mean profit, and if property values in the area remain flat or even decrease, there is the potential for financial loss
- Full responsibility – Should anything go wrong with your home, you are responsible for covering the cost of uninsured maintenance and repair work
- Upfront costs – Before moving in, expect to pay at least 5.5 per cent of the property’s value upfront for an FHA loan and closing costs
- Furnishing costs – Furnishing an empty home requires a great deal of time, money, and energy
So, is it really best to rent or own? Unfortunately, there is no right or wrong answer and it all depends on your own situation. Apply the pros and and cons to your own circumstances to see which side you come down on.