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It still pays to own a home

A home is offered for sale by Remax Realty in a Toll Brothers housing development in South Barrington, Ill. 

The diss on owning a home these days is too glib. The rent-is-the-future crowd is making the same mistake as housing boosters did during the boom -- that current conditions will stay the same well into the future.  

During the bubble years, people took on huge mortgages, insurance payments and other costs, convinced that prices would keep skyrocketing. When the market collapsed, many owners were left anchored down by an underwater mortgage. Or worse, sunk altogether by foreclosure.

The conventional wisdom that renting beats owning misses a shift in the market. In many parts of the country, the monthly cost of owning -- mortgage, taxes, insurance and all -- is less than renting. The trick remains finding a bank willing to lend you the money to buy a house.

Still, demographic trends favor owning a home. A majority of those 65-plus own. Older people like growing old in their own place, and the massive Baby Boom generation will swell the ranks of the elderly. Immigrants are coming in record numbers and owning is the classic milestone of "making it" in their new country. And as the economy improves, the boomerang generation will flee their parents' basement and start their own families. Some will decide buying beats renting.

One of the more intriguing changes favoring owning is the Internet. Americans are moving around looking for a place to settle in fewer number than before. The Internet has taken out much of the guesswork. It's easy to gather information online. The result: A more efficient economy at matching people and place. I bet they'll put down roots by buying once they've made their choice.

The real takeaway from the housing bust is that speculating with too much debt and too little equity is always perilous. It doesn't pay to own without prudent financing. Still, most Americans will find there comes a time when they'll want to freedom that comes from owning a home rather than abiding the rules of a landlord. The right question is: at what price?

Is the real estate market really recovering? The latest housing market numbers seem to show that home buying has bounced back, thanks to record low interest rates. But experts like Glenn Kelman, CEO of Redfin, say not so fast when it comes to buying a home.

About the author

Chris Farrell is the economics editor of Marketplace Money.


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