A home has long symbolized the American dream. Wrongly, in many opinions. But is a home still worth owning considering the collapse of one of the biggest bubbles in history — residential real estate? It depends.
The housing market continues to mend, although at an unspectacular pace. The homeownership rate is still down significantly from its peak of 69.2 in the waning months of 2004.
So, if you think you might be in the market for a home, there is only one question that really matters, especially for first-time potential owners: How secure is your job?
The greater your job insecurity, or the newer your job, the smarter it is to rent. Renting makes sense when there’s a realistic risk you could be unemployed, or perhaps eventually forced to move to another part of the state or country for your job or to get employment. Downsizing, restructuring, rightsizings — pick your favorite euphemism for layoffs — remain commonplace in many industries and businesses. If you’re married or with a partner, how safe is their employment?
Renting remains the best option for those with new jobs or for the financially insecure. It’s easier to get out of a lease and move than it is to sell a home.
By the way, the old saw that renters are “throwing their money away” is wrong. Renters can always set up a monthly savings plan to build up equity. If the money goes into a well-diversified low-cost investment portfolio, odds are that the renter will do better financially compared with the return earned by homeowners.
The answer to the question “to rent or to buy” — lies in the job market, not the housing market.