Is Home Ownership Still the Best Investment or is Renting Safer?
To buy or not to buy...the age old question that has plagued many Americans. In the past home ownership versus renting was considered a "no brainer" for most-of course you buy. However, thanks to one of the worst economic downturns in 70 years, this question isn’t answered so simply.
After being shell shocked the past few years, Americans were ambiguous about whether real estate was still the safest investment. People who never believed they would ever be slapped with short sale or foreclosure are upside down in their homes and needing to find a way out.
Renting has become an alternative to those who had to foreclose on their homes or didn’t have the down payment or healthy credit rating needed to obtain a traditional mortgage.
Fannie Mae Tells the Story
However, a recent survey conducted by Fannie Mae tells a different story. The April 6, 2010 survey reports that two-thirds of Americans prefer to own their homes versus rent. In fact, seven out of 10 Americans still believe that home ownership continues to be one of the safest investments.
Mike Williams, Fannie Mae CEO and president, believes that the fabric of integrity and commitment continues to thrive in America. "Despite the recent downturn in the housing sector, Americans continue to value homeownership and think about their homes in ways that go much deeper than the financial investment. The public also strongly believes in the importance of upholding the financial commitment involved in buying and owning a home, even during these challenging times when home values have fallen."
Although more folks want to purchase a home, the Fannie Mae survey demonstrates that stringent lending standards have people thinking twice about obtaining a traditional mortgage. Three-fifths of consumers say that buying a home today is more challenging than the process their parents with through years ago.
However, two-thirds of renters say that they still plan to purchase a home eventually.
You can Still Achieve the American Dream
Knowing that the majority of Americans are still clinging to the dream of home ownership, when and how do you move from renter to owner? Most mortgage brokers and loan professionals say that now is the perfect time to purchase a home. Prices are stabilizing, rates are at historical lows and there’s still a small window of time to obtain the home buyer tax credit.
The challenges many home buyers face today include having money in the bank and a strong credit rating. Thanks to some lenders condoning "driver’s license mortgages," lending standards have a choke hold on loans. Even people with excellent credit are having trouble obtaining a mortgage, so what hope does the "average Joe” have in this loan environment?
The Great Recession wiped out many jobs, forcing people to resort to measures they never thought were within their realm of reality. Some people maxed out credit cards to get by, whereas other people dipped into savings. Others simply couldn’t pay bills. The result was a marred credit report and a significantly reduced nest egg.
What can you do to become fiscally fit and a viable candidate for home ownership? One step in the right direction is to obtain a copy of your credit report and review it with a fine tooth comb. Search for inaccuracies, old debt that you previously paid and areas of repair such as too many outstanding, unused credit cards.
If you are having trouble paying bills, contact each creditor to work out a payment system. Chances are, if you aren’t paying your bills, creditors will be more than happy to work with you to get you on the right track.
Reduce expenses to help you build back your nest egg. Is that morning latte really necessary or would you prefer to continue to drink it in your rented home or apartment? Make a list of items you can "live without” and watch your savings increase. Don’t fall into the trap; however of simply transferring one expense to another—put the morning latte money directly in a savings account or high yield money market.
Go house hunting often. That diamond in the ruff is out there. With a high inventory of foreclosures and short sales, you can find a home that’s right for you and your budget.