The Rent v. Buy Debate Continues

• March 30th 2009

by Mark Wellborn

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Late last week, we published a post that compared the cost of renting in DC versus buying now that interest rates are at 4.85 percent. On Friday, The Wall Street Journal wrote an article that weighed the pros and cons in the same debate. Outlined below are some of the advantages/disadvantages that they pinpointed.

Pros

• The government is offering an $8,000 tax credit to first-time buyers, and interest rates are at historic lows.
• Despite the poor state of the market, prices will recover. If you buy a home, and hold on to it for a long enough period, you will see equity build up.
• If you buy a distressed property in a neighborhood where such properties are few and far between, it translates into instant equity because of the difference between the sale price and the market price.

Cons

• Large down payments are now being required to buy homes which means that, for many, a substantial chunk of personal savings will be needed to buy. This means that instead of having a diversified investment and savings portfolio, you are putting all your eggs in one basket.
• If your home goes into foreclosure, the damage to your credit is severe and it will take years to repair it.
• Unlike renting, where you can just call the landlord when things go wrong, home ownership has a number of unpredictable hassles and costs. From The Journal: “The monthly costs of ownership are typically around 40% higher than the cost of the loan when you figure in repairs and maintenance, property taxes, and insurance. And though you may get a deal from a handyman who needs work in this bad economy, don’t expect a break on property taxes.”

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This article originally published at https://dc.urbanturf.com/articles/blog/the_rent_v._buy_debate_continues/726.