People normally rent something that suffices current requirements and buy something that suffices current requirements+future requirements+luxury+sense of pride of ownership+wife/kid sense of nesting+ etc
So you cannot compare say renting a 2bhk in Mira Mesa for an avg $1650/month (incase you have a family and are not sharing a 2 bed apt!) and buying a home for 750K.
With $1650/month, you are paying about 20K on rent. This (considering you are well above a 25K gross income bracket) doesn’t help in any deductions during tax time.
Now, instead of a 750K home, I would like to suggest an example where you purchase a 500K home with 10% down (or more if you want) at 6% 30Yr fixed. If you get a place where HOA and Mello Roos are low or non existant, you will probably end up paying 30K a year in interest payment and property tax.
So the difference with a rental today would be 10K (without considering tax benefits) if you purchased such a home.
Now, depending on your tax bracket, it might not be a 10K difference in the end. For me, its about 6K. Lets not leave aside any incidental homeowners expenses, HOA, insurance etc for the moment and get that annual premium figure 6+2 = 8K. (conservatively)
So if you buy a home, you spend about 8K more (today). Is it worth ?
Consider the following
1. Rents go up …and the other cons about renting
2. Well may be not today, long term, your home should be worth more than what you bought …and the other benefits already pointed out on financial front. If you would have bought stocks worth 8k instead, you can even think that you bought stock worth 8k of your home!
3. If you got wife, kids …you better give a lot of importance to what Marion said above.
4. If you are dual earner family, its really a no brainer with the 8K premium ..infact you perhaps need a mortage deduction to avoid AMT – you never know!
I am not suggesting you go buy something right away, I am not suggesting a right time to buy either. All I am telling you that your dilemma is because you are shortsighted.
Buying a home is not foolishness unless you are caught up in funky mortgages with intentions to flip during a housing downturn.
