Personal Finance, The Home 

Beating the First Time Homebuyer Squeeze: Rent!

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When I was looking at houses last year, I was concerned that I was buying near the peak of the housing boom and that home prices would stagnate for a few years. As educated as I was with regard to current affairs and as green as I was in terms of understanding the principles of housing markets, I figured I was going to abstract away the housing market forces and make the purchase decision based on the merits of the house, not the market. It turns out I made the correct decision because now homebuyers are facing what CNNMoney calls the first time homebuyer squeeze. Mortgage rates are at a 4 year high and continued growth in home prices makes a home purchased today cost several hundred more than the same house purchased one year ago. So what’s a homebuyer to do?

I can’t predict the future and chances are you can’t (or you don’t own a copy of Gray’s Sports Almanac, that’s a Back to the Future 2 reference) but buying a house is one of the best moves anyone can make – to a point. Sure, the points of the article are that buyers are now renting instead of buying or looking in less desirable markets in order to buy something they can afford. The article rightfully argues against interest only and 100% financing but honestly, if you can’t afford the house you want and it’s within reason – just wait.

There is nothing inherently wrong with renting an apartment. The only reason why everyone thinks it’s “wrong” is because years and years ago mortgages and rents were much closer than they are now and that fact has been beaten into the minds of every young professional out there. Gain equity! Own a house! In Baltimore, you can split an apartment with a roommate and pay less than $700 a month in rent, I know someone (pmoa) who has a nice apartment and pays much less than that. Much less.

Rent… then save that extra in an Emigrant Direct or ING Direct account.

{ 4 comments, please add your thoughts now! }

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4 Responses to “Beating the First Time Homebuyer Squeeze: Rent!”

  1. Lynn Bradford says:

    I began renting in Cape Coral Fl about 1 year ago. I have just moved into another rental here on a canal with direct access to the gulf. I keep my sailboat at the dock provided, rent is $800.00 per month, furnished, yes furnished This includes cable, water, sewer and garbage. The clincher is the pool, and parking for my 2 autos and Harley. I nearly bought into this condo a year ago for $240,000. The asking price today is $190,000 and I am enjoying the wait until the price decline further. You crunch the numbers, renting this condo at this price is the only way, I repeat….the only way.

  2. jim says:

    It sounds like you’re getting a hell of a deal on that condo… makes it hard to buy when you can get a deal like that. My friend getting cheap rent is in the same situation, why pay more for “equity” when you can pay pennies for your rent?

  3. Aimee says:

    It’s true, renting may now be a cheaper option again. It sure wasn’t a year ago when we got our home (for just a little more than what we were paying in rent). Still, a home is always a good bet if you can do it, since you do have to live somewhere! Better to get yourself rich than your landlord. 🙂

  4. mbhunter says:

    Around here it’s ridiculous — renting’s a much better option until the foreclosures start happening 🙂

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