It’s not easy to decide if buying a home is worth it or if renting makes more financial sense. Data from the Bureau of Labor Statistics offers some food for thought.
The BLS compared average annual expenditures on housing-related items between homeowners and renters (2012 data). The findings probably won’t surprise you: renters, on average, pay more for the roof over their heads, but homeonwers pay more for everything else associated with it, such as maintenance, insurance, and water and other public services.
When you buy a home, you’re likely to spend more on "lifestyle creep" items, like home furnishings, and, because you’d likely buy a bigger home than you’d rent, utilities.
Renting might be cheaper overall—depending on where you live and if you take that saved money and invest it instead—but as the Motley Fool points out to further stir this debate, buying a home is a sort of forced savings that ultimately can increase your net worth:
Warren Buffett once said, "All things considered, the third best investment I ever made was the purchase of my home, though I would have made far more money had I instead rented and used the purchase money to buy stocks."
While Buffett believes that his home was a great investment because of its "52 years of terrific memories," Fool analyst Anand Chokkavelu believes homeownership is better than renting for most people for financial reasons. Anand argues that buying a home acts as a commitment device for people to save money. By being forced to sock away money every month for a home, people build equity in that home, rather than spending it on things they don’t need. This forced savings can be seen in the median net worth of homeowners, which is 30 times greater than that of those who don’t have a house.
It’s a very individual choice, so a calculator like this one from The New York Times could help you make this tough decision.
Renting vs. Buying a Home: Comparing the Monthly Costs | The Motley Fool
Photo by Phil Sexton.
via Lifehacker
The Difference in Monthly Housing Costs Between Renters and Homeowners