February 9, 2017
February 9, 2017
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To Rent or to Buy, that is the question. We have all heard the pros and cons on this issue. Advocates of renting say that home prices hardly ever keep up with rising inflation; that there are constant maintenance/repair costs, and let’s not forget closing costs, homeowners insurance, property taxes, etc. Advocates of buying simply say that renters are throwing their money away. And, even if renting is less costly than the PITI of buying, renters generally don’t save the difference. They say that the biggest benefit of homeownership is the “forced savings” of the building of equity. In 2010, the Federal Reserve looked into this question. At that time the median household net worth was $77,300. When the Fed tallied up all the assets of a median household, such as house, car, stocks, bonds, IRAs, 401(k)s, savings accounts, checking accounts certificate of deposits, cash on hand, equity in private business, gold, or any other possible asset, and then subtracted mortgages, credit card debt, student loans, etc., they found that homeownership was a significant portion of the median family’s net worth—“60% more”. Of the $77,300 net worth, $47,500 was tied to home equity! In an article by Anand Chokkavelu, who writes for The Motley Fool on investment matters, he checked to see if these “net worth” benefits apply only to those who are most likely to own homes—such as older people, more educated people, etc. He found that households headed by people under age 35 have a median net worth that is about double the median of non-homeowners, and that households with no high school diploma have saved more than triple what the non-homeowner has. Even families in the bottom 20% of income have more net worth than non-homeowners. Homeownership, it seems, still remains one of the best ways for most of us to acquire financial security. The bottom line is that buying generally wins the debate.

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