Why Rent When You Can Buy?

Are you unsure about becoming a HOMEOWNER?
Thinking that you can’t afford to BUY a home?
Are you worried about whether home buying is a good INVESTMENT?

    Buying a first home can be an intimidating process. But the first step is making those first decisions: I want to own my own home; I can afford to own my own home; owning my own home makes sense for me financially and emotionally. If you are still struggling with those first decisions, here are some facts that might help you make that first step towards becoming a homeowner.

   You Can’t Afford NOT to Buy a Home!

   Over the last ten years, the cost of rental housing in the U.S. has increased an average of 3 percent per year. That means that an apartment or home renting for $750 per month will cost more than $978 a month in ten years. If you rent the same home for ten years, the total amount you would pay for rent will equal $103,000.

Year	Monthly Rent (avg. increase 3% / yr.)	Total Annual Rent
1	$750.00	$9,000
2	772.50	9,270
3	795.70	9,548
4	819.60	9,835
5	844.20	10,130
6	869.40	10,433
7	895.50	10,746
8	922.50	11,069
9	950.00	11,401
10	978.60	11,743
Total rent paid over ten years		$103,175

   Tax Advantages of Owning a Home Result in Savings

   None of the $103,175 is returned to you; either through savings or as an investment. Homeownership, on the other hand, has tax advantages over renting a home, and those advantages can help you save money. Unlike your monthly rent, part of your monthly mortgage payment “comes back to you” in tax savings.

    Total Annual Costs

	Homeowner	Renter
Annual Mortgage/Rental Payment	$7,584	$9,000
Real Estate Taxes	1,380	0
Mortgage Interest Tax Deduction	-1,940	0
Tax Deduction for Property Tax	-408	0
Mortgage Principal Accumulation	-1,116	0
Appreciation*	-4,950	0
Total Annual Cost	$550	$9,000

   *Based on 4.5% annual appreciation rate, from the NATIONAL ASSOCIATION OF REALTORS® Median Sales Price data series.

    Homeownership is a good investment

    For the majority of Americans, their home is their largest financial asset and a major player in their investment portfolio. It’s a good thing, too, since stock market value has declined since 1998, while home price appreciation has increased. The NATIONAL ASSOCIATION OF REALTORS® estimates that home value rises, on average, by 4.5 percent a year. That’s a steady return on investment; one’s own home is a much less volatile asset than stocks, bonds or mutual funds.

    As an example, let’s look at a $110,000 home. Unlike your rental unit, your home should appreciate over time. Assuming a 4.5 percent appreciation rate, your home will be worth $114,950 in the second year of ownership, $120,123 in the third year of you owning it, etc. After ten years, you $110,000 home will be worth $163,470. Not only do you earn a rate on return on your original purchase price, but you also get a return on any subsequent appreciation.

   "Appreciating" Returns

Year	Home Value	Yearly Appreciation
1	$110,000	$4,950
2	114,950	5,173
3	120,123	5,406
4	125,528	5,649
5	131,177	5,903
6	137,080	6,169
7	143,249	6,446
8	149,695	6,736
9	156,431	6,951
10	163,470	7,206
Total appreciation over ten years		$53,470

   Homeownership Builds Wealth for Households

    The Federal Reserve Board estimates that homeowners have a net worth almost 36 times more than that of renters. In 2001, the median net worth for homeowners was $171,700 compared to $4,800 for renters. How do you build up your net worth? Through those “appreciating returns” on your home.

    Homeownership – It’s NOT Just About Money

    The “numbers tell the story” should ease your mind about the financial aspects of becoming a homeowner. But there are other, less monetary, benefits to homeownership. Several research studies indicate homeownership adds to the value of communities, have positive effects on children, and even contributes to increased voter participation rates.

    Homeownership: The American Dream

    More than two thirds of American households own their own home. They know the benefits of homeownership, from the accumulation of home equity, tax incentives, and the pride of owing a place of their own. They also had to take that first step of deciding “I’m ready to be a homeowner.” REALTORS® assisted many of those more than 71 million homeowners in both their decision to buy and their first home purchase. REALTORS® are real estate professionals who are members of the NATIONAL ASSOCIATION OF REALTORS® and who abide by the Association’s strict Code of Ethics and Standards of Practice. They can help guide you to first-time homebuyer programs in your area, as well as assist you in searching for and buying your home.

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