In the past year or so, I’ve gotten a lot of…shall we say, “friendly encouragement”…from older friends advising me to buy a house. With the financial crisis, and housing prices lower than they’ve been in years, they’ve said it makes great sense to get into home ownership. But there’s a catch: if I want to buy a half a million dollar house, I’ll need at least $100,000 as a down payment. Frankly, there are definitely things about home ownership that appeal to me. I might even admit that there’s a certain prideful part of me that thinks home ownership is a necessity before Charlene and I expand our family. But there’s also a part of me that’s not fully convinced.
Thankfully, I might not be totally wrong. According to an article in the New York Times, for many people in this country, it makes much more sense to buy a home than to rent. But in certain locations, including San Francisco, Portland, and Seattle, housing prices are still high, and it might not make sense to buy…yet.
The gist of their argument is based on something called the rent ratio. And I really like the concept. The rent ratio is the price of a house divided by the annual cost of rent for something similar. The article indicates that if the ratio is greater than 20, it might not be a good idea to buy. (The rent ratio in the Bay Area is closer to 30.) However, “when the ratio is well below 20, the case for buying becomes a lot stronger.” Well, it’s going to take a lot more of a drop in housing prices before we get to 20 around here.
I also like the sobering reminder that home ownership isn’t all a bed of roses:
But it’s worth remembering that the advantages of homeownership are frequently exaggerated. The mortgage-interest tax deduction doesn’t eliminate the cost of borrowing money; it merely reduces it. The freedom to paint your house any color you wish comes with the responsibility of paying for a new roof when the time comes. The $15,000 or $30,000 or $50,000 that real estate agents’ fees add to the price of a house can wipe out a lot of other savings.
So there you have it. I know a lot of our friends are settling down and buying houses. A couple of our friends have even bought, knowing that it wasn’t a good investment, but seeing it as the cost of living in a nice place. We’ll see what happens for us.
At the end of the day, I just have to remind myself that God will provide–Jehovah Jireh! He always has, and He always will.
