My husband teases at me when I talk about the Bubble Bloggers…not because they’re funny (they can be), it’s simply the phonetics. Our local bubble bloggers are a very serious and determined group of individuals. In a nut shell, they believe that Seattle’s home values will plummet or burst like a popped bubble and when this happens, it will reek havoc for current home owners. Many of them feel it is much better to rent than to own a home for financial purposes. The Seattle Bubble is probably the most well known local blogs on this topic.
Recently, an article I posted on Rain City Guide, The Great Rent vs. Own Debate, was featured (or should I say, "flogged") on the Seattle Bubble and Priced Out Forever (these blogs share writers). Eleua, one of the "bubble bloggers" asked me if they could do this and I must tell you, I was a bit nervous about how this would all shake down. For starters, where ever there are numbers and stats, there is opportunity for debate. Numbers can be twisted and recalculated to prove anyone’s theory. I must say they were very fair and kind in their "flogging" of my post.
Here are some points they make on why it’s better to rent than to own a home (I’m not going to debate these points in this post):
- Renters are not responsible for repairing or maintenance of the building. (I do spend many weekends at Home Depot with my husband to work on our house…and I love it).
- Freedom to pick up and move when your lease is up without the cost of selling a home (approx. 8-10% of the sales price including commissions, 1.78% excise tax for King County and closing costs).
- You can invest the funds you would use for down payment and earn interest on it (your home equity does not earn interest).
- You may be able to rent a nicer home than what you can afford to buy for the same payment.
- The standard tax deduction may be better than the deductions you’re allowed as a home owner itemizing your mortgage interest and taxes. (As always, check with your CPA regarding any tax matters).
- And of course, home values are going to tank once the Seattle bubble bursts.
I wrote The Great Rent vs. Own Debate over an exchange of comments on one of Rain City Guide’s post where I stated something along the lines of "owning a home is an automatic savings plan for some borrowers". I still believe this to be true based on what I’ve seen in my past seven years as a Mortgage Consultant.
Many people are not putting away money into savings accounts, retirement, planning for college…you name it. When you make a mortgage payment (assuming it’s not interest only), you are applying a small portion of that mortgage payment towards reducing the principle balance. For Americans who do not put 10% of their gross income (or anything) into an investment vehicle (no…not a new car!), this is their only source of savings. They are at least putting some money away where they do not have immediate access to it (unless they treat their home equity like an ATM).
I will be the first to admit that a big reason why I have bought homes is emotional. I have "a need" to own a home. I grew up renting and moving around quite a bit as a kid. I feel grounded and I have control over the home…it’s mine! With that said, owning a home has proven to be the best investment for me. I would not have realized the appreciation and profits from renting that I have as a home owner over the past 18 years.
Home ownership is not for everyone. Especially people who are careless with their credit and spending. You need to be responsible, plan for repairs and improvements and make your mortgage payments on time. Buy a home because you want to live in it and you want to be your own "home sweet home".