You may have seen reports in the news recently saying its better to rent right now than it is toown your home. But before you let that impact your decisions, you should understand what these claims are based on.
A lot of the time, these reports are assuming things that arent realistic for the average household. For example, themethodologybehind one of those reports says that renting is the smarter financial option because of the opportunity to invest money elsewhere. It assumes renters take the money theyd spend on costs tied to buying a home and put it in an investment portfolio.
But heres the thing most people who rent arent making those investments. Ken Johnson, Co-Author of theBH&J National Price-to-Rent Index, explains:
One of the difficulties with the rent and reinvest model is many people . . . simply rent and spend the difference. . . .Thats wealth destroying.
The reason homeownership is one of the best investments you can make is the wealth it helps you build. Thats why theres a significant difference between thenet worthof the average homeowner and the average renter (see graph below):
So, before you renew your rental agreement, think about the opportunity to build wealth thathomeownershipprovides.
Bottom Line
If youre unsure whether to continue renting or to buy a home, connect with a Seven Gables Advisor to help you make the best decision.
