Cupertino, CA. January 3, 1994 - As a renter thinking of buying a home, you might be thinking that this is the best time in years to take the plunge. Interest rates are at their lowest levels in decades, real estate prices have declined over the last couple of years and home sales have started to surge over the last couple of months. You must buy now before your opportunity disappears. Right? Wrong! At least this is what Mitchell Levy, author of the book "Home Ownership: The American Myth," says.
"Owning a home makes financial and/or emotional sense for a lot of people, but it doesn't necessarily make sense for you," says Levy. "It's important when making a decision to buy a home to view it rationally, don't just jump on the bandwagon because everyone else is doing it, or because your friends or family say that you have to." In his book, Levy analyzes the rent versus buy decision for a number of cities around the country. His results show that real estate is overpriced in cities like San Francisco, Honolulu, Los Angeles, New York, Chicago, Boston and Washington, D.C. This doesn't mean that it won't make sense to buy for your specific situation, but that in general, these cities could favor someone who decides to rent and save the money they would otherwise put into a home.
A rational decision, according to Levy, is one where the prospective buyer evaluates both the financial and emotional components. On the financial side, the spreadsheet used to compare renting versus owning shows that without "reasonable" real estate appreciation, in most areas of the country, one will save money by renting and saving the difference they would otherwise put into a home. It's important for you to determine whether a "reasonable" amount of appreciation will occur for your particular situation. Levy advocates buying if, after analyzing the dynamics of your situation, you feel that the appropriate amount of appreciation will occur.
After looking at this decision from a financial perspective, the prospective home owner needs to determine their emotional reasons to purchase. Quite often, the emotional reasons are more important than the financial ones. In these cases, a decision may be made to purchase a home even if the financial reasons dictate a decision not to purchase. In either case, the decision of whether or not to purchase a home was approached rationally.
"Home Ownership: The American Myth," by Mitchell A. Levy (Published by Myth Breakers, 21265 Stevens Creek Blvd., Suite 205, Cupertino, CA 95014), 160 pages, $11.95, available in stock.
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