National Public Radio (NPR) recently ran a series of informational articles about the housing market. This article focused on the timeless question, “Is it better to rent or to buy?”
Here are NPRs responses:
- NPR points out that owning a home is the number one way that most Americans build wealth. Referring to housing experts such as Alanna McCargo, the vice president for housing finance policy at the Urban Institute, McCargo pointed to the fact that the average net worth of a homeowner is much larger than the net worth of a renter. “Families have built wealth for generations and financial security over time as a result of owning a home.
- In 2016, the average net worth of a homeowner was $231,000; the average net worth of a renter was $5,200.
- NPR was quick to remind its readers/listeners that buying a home was NOT an automatic ticket to “the good life.” “If you take away the difference in wealth accumulation,” said Elizabeth Dunn, psychology professor at the University of British Columbia who studies how time, money and technology shape human happiness, “research does NOT definitely show that buying a home makes people happier. Renters don’t have to fix/replace water heaters or roofs.”
- Renters have MUCH MORE flexibility. Renters can move if and when they want to much more easily.
- BUT flexibility comes with a cost. Rents ALWAYS go up. McCargo of the Urban Institute said, “If you have a fixed rate mortgage, your mortgage is a fixed cost. If inflation rises, living in your home becomes cheaper and every month, you are reducing your debt load and building equity.”
- NPR reminded its listeners/readers that homebuyers do NOT need to put down large down payments on a home.
- Today’s average down payment is 5% of the total cost of the home…it used to be 20%.
- First time buyers can find lower down payment programs in some cities that offer grants.
- NPR suggests that first-time buyers go the their respective state’s housing financing agency for help. NPR said that owning a home can give a homeowner a sense of security that a renter will never have. It’s up to the individual to decide whether or not that sense of security is priceless.