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Don't Buy A House

I am a real estate salesperson, which means I make money selling homes.  But guess what? Not everyone should buy a home, and I don’t mind telling you that.

The housing market today and for the next couple years will continue to be hampered by foreclosures and short sales but, even more importantly, by a weak job market and tons of homeowners who cannot afford to move from their current homes.  This means that even when the housing market stabilizes and starts to rise, that rise will be heavily tempered by additional homeowners putting their homes on the market for sale.

For every few percent that median sales prices rise, many more current home owners will be in a position to sell and that extra supply will limit future price gains.  Further, interest rates can and will rise.  Even if the rates go up to 6% – still a historically low level, the decrease in purchasing power from today’s levels is huge and will also be a drag on home price appreciation.  There is also talk of changes to tax law that may reduce or eliminate the mortgage interest tax deduction, a sacred cow in the real estate industry and a significant incentive to home ownership.

Given today’s market, unless you can see yourself staying in a home for at least 3-4 years or you can purchase for far less of a mortgage payment than rent, I would suggest you strongly consider renting.  By the time you consider all taxes and fees involved in the purchase and subsequent sale of a home, it costs approximately 8% – 10% of the value of the home just to get into and out of it.  That doesn’t mean you shouldn’t buy, but I believe far more conversations need to happen in this situation to make sure that purchasing a home is the smartest move for you.

All of this is of course an oversimplification of things and I will tell you that every situation is different and should be looked at with careful consideration of what is best given the specifics of that situation.

There are many people who should own homes in today’s market, but the idea that everyone can and should be a homeowner is hopefully one that is gone from the conversation permanently.  There are tons of great things about home ownership and a lot of reasons why some people should be taking advantage of this market today but there are 100′s of articles that talk those things up so I don’t feel the need to regurgitate them here.

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2 comments
Shoreview Homes
Shoreview Homes

Aaron, great post here! I teach classes in the St. Paul Community Education Program, and I express this very same perspective at the beginning of every class I teach. Homeownership is not for everybody, and one needs to consider the entry costs, maintenance costs, and exit costs associated with owning a home as part of the decision matrix. Some lead a lifestyle or have financial priorities that suite renting more so than owning.

Ria Wise
Ria Wise

You are quite right. Especially in this climate, where even the work sector is experiencing instability. It is imperative to look into your finances and paying capabilities, before taking a huge chunk of your savings into buying a house.

Disclaimer

TwinCitiesRealEstateBlog.com is not a Multiple Listing Service MLS, nor does it offer MLS access.
This website is a service of Aaron Dickinson of Edina Realty, a broker Participant of the Regional Multiple Listing Service of Minnesota, Inc.