The Buy/Rent Conundrum

Since I have been in the mortgage business since 1997 and have sold mortgages since 2001, and have owned several properties in my lifetime, I'm in a pretty good position to speak to this issue, interestingly analyzed by Megan McCardle at The Atlantic today. Megan's view is a bit weak, but essentially she does make the point that investing in a house is not particularly a good choice. To buy a house, one needs to consider it as a home, not a place to park for a few years, make a killing, and pocket or reinvest some tax free capital gains (i.e., up to $500,000 for a married couple).

If one were to put all the different factors in that go into owning a primary residence -- the large downpayment, the tax-deductible interest expense and property taxes, maintenance/upkeep/replacements, inflation, and external economic influences such as schools, political events, and acts of God -- I'm sure that one could make an argument either way for the benefits or liabilities of home ownership. Sod all that stuff, though. If one buys a house and stays there for a long time, one has put down some roots in a community and enjoyed the benefits of that community.

Lisa and I have lived in the same neighborhood (two different homes) for over nine years now. We joined and have worked out at the local YMCA since Max was a baby, shop at the local markets, eat at the local restaurants, send our kids to the school right across the street, play in the local parks, trick or treat at our neighbors's houses, attend movies at the local mall, and are members at the closest synagogue to our house. We know so many people in our little community, and enjoy their goodwill and hospitality (and they ours) often enough to make it very difficult for us to move at any time in the next 30 years. We love it. So even though we've currently lost more than $100,000 in equity on our current home, we know that's a relatively small price to pay for being in one place.

When I was single after college, I moved practically every year, and even though I never accumulated much stuff to haul around, it was a pain in the ass every time. I had absolutely nothing to show for it after all those years except a lot of mismatched furniture (since donated or trashed) and a lot of stories about this or that party.

There is also a lot to be said for being able to have a home that is to our specifications. Lisa and I built the house we now live in. It wasn't perfectly to our needs, but as close as we could get given our budget and the limitations of the property. Megan mentions the benefits of blackout curtains; we have them in every bedroom in the house. We also have enough hot water (most of the time) and light from outside to make our house cheery. But, the downside is that we pay for anything that breaks down. It's a trade-off; and it's very worth it because we don't like to move around anymore.

Given the current state of mortgage rates, it's almost insane to rent if you can afford to buy. But be sure that you want to stay put for 5-10 years or longer. Otherwise, it's a losing bet.