Tuesday, January 4, 2011

Renting vs Owning...Which Is Better?

Franklin American Mortgage Company sends out a weekly newsletter.  In this week's edition, I found the following information that points to the benefits of long range (5 years or more) ownership over renting.

"House price appreciation may not be what it used to be, but most participants in the National Association of Realtors’ annual profile of buyers and sellers still believe home ownership is a sound investment. Of the folks who purchased homes during the 12-month period ended in June, 85% said owning is a good financial investment. And of those, 47% said ownership was a better investment than owning stock, according to the survey, which was released at NAR’s annual convention in New Orleans. The results were similar, whether the buyers were first-timers or repeaters, or bought new or previously-owned houses. Ditto whether they were married or single, male or female. Sellers weren’t asked how they felt about their housing investments. But those who held their properties for five years or less didn’t do nearly as well as people who owned their places longer. Sellers who owned just two or three years were unable to realize any gain, while those who purchased in the 2004-2006 time frame took a profit of only $6,000, for a gain on only 3%. After that, sellers’ gains started piling up: $17,000 (11%) after six years, $35,000 (26%) after eight years, $49,000 (40%) after 11 years, $79,100 (78%) after 15 years and $108,300 (152%) after 20 years. But in an interesting anomaly, sellers who sold after 12 months or less bagged a $37,600 profit, or a 17% gain, probably because they had purchased a distressed property and substantially rehabbed it prior to putting it back on the market. Source: National Association of Realtors."

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