Here, in a nutshell, is the case for own-ing a home: Affordability. Low mortgage interest rates and defl ated house values have made homes downright affordable to purchase and own compared with earlier this decade. In fact, house payments are now back in line with incomes, according to Richard Green, director of the Lusk School of Real Estate at the University of Southern California in Los Angeles. That means more people can own a home without having to stretch beyond their fi nancial comfort zone. The classic question of whether to rent or buy a home can be tipped one way or the other by tweaking the underlying as-sumptions, such as the opportunity cost of not investing equity elsewhere and annual expenses for repairs and maintenance. But if the assumptions are reasonable, owning a home can be cheaper than renting, though that’s more likely to be true in, say, Fresno or Bakersfi eld, than, perhaps, Malibu or La Jolla. Homeowners also get a number of federal and state income tax advantages, including the ability to deduct mortgage interest and property tax expenses. Return on investment. The potential for price appreciation isn’t as easy an argument to make since real estate is an illiquid as-set burdened by high transaction costs and anyone’s return depends at least in part on the near-impossibility of timing the market. Short-term real estate investments, known as house fl ipping, aren’t likely to pay off in the current climate, since house prices remain soft in many areas. Yet some markets could experience a rise in home prices over a longer period of time, suggests Cynthia Kroll, senior regional economist and executive director of staff research at the Fisher Center for RENT OR BUY: 10 KEY QUESTIONS Truth be told, not everyone can or should own a home— even with the many benefi ts of homeownership. Here are 10 questions that can help buyers sort out whether owning makes sense for their personal situation: 1. Do you want to own a home? Can you fi nd a home to buy that you like? Can you fi nd a home to buy that's located where you want to live? Can you fi nd a home that you can afford to buy— and own? Can you qualify for a mortgage or pay cash to purchase a home? Does the cost of owning a home compared with renting make sense for you? Is your job or other source of income secure? Do you have a fi nancial cushion in case you suffer a serious or prolonged loss of income? Do you expect to remain in the same community for at least several years? Do you expect to live in the same home for at least several years? 2. 3. 4. 5. 6. 7. 8. 9. 10. If you answered yes to these questions, you're a good candidate to own your own home. AUGUST 2011 • CALIFORNIA REAL ESTAT E B-5
California Real Estate August 2011 Special: Page 5
