Monday, June 23, 2008

Rent

Op-ed by Paul Krugman in today's Times - maybe home ownership isn't all its cracked up to be.

In addition to the regular tax breaks that all home owners get (the deduction of mortgage interest), if you are clergy with a pulpit and no parsonage you get to knock the costs associated with homeownership (furniture, utilities, the lot) off your taxable income. This obviously made buying a home all the more attractive in the situation we were in in Illinois. Not to mention that at the time, prices were rising - not skyrocketing, but rising steadily. Then, of course, things went off a cliff - both for us, and in the housing market.

Krugman is right to point out the dangers. Home ownership can be a very effective way to build a nestegg, if you are planning to stay in your home for a long time and if you don't keep dipping into the equity. For people who can't or won't make that commitment, it's a big gamble that home prices will rise enough for you to make something out of the deal, or even just make back what you put into it. Or even, as in our case, that you'll be able to rid yourself of the house at all.

The one financial advantage to renting is that one doesn't have to pay property taxes. I suppose in most cases this is figured into the cost of the rent.

I'm not saying anything that anyone else doesn't know. But while we were in seminary we were constantly inundated with the "knowledge" that because we were renting, we were "throwing our money away" - and we believed it. Then there's the language of "putting down roots" - that if you don't buy, you're not doing it, as if one's presence in a place is only verified by a deed. All these factors led us to buy as soon as we landed in a job, which led to the distastrous situation we're in now - and now there's no danger that we're going to buying another house anytime soon. So I guess the real answer is - there's no such thing as a sure thing. Despite the civic-religious tenet of home ownership, sometimes renting is indeed the right thing to do.

1 comment:

Mary T said...

Its too bad there aren't more ways to buy houses without mortgages. Most of the time only the banks really make any money, its funny--cuz really they don't put anything into the house, but someone else's money, and they take out someone else's money too. Sometimes I wonder what the world would be like w/o insurance, banks and lawyers. ;)