By Sam Baker, KERA Morning Edition Host
http://stream.publicbroadcasting.net/production/mp3/kera/local-kera-860758.mp3
Dallas, TX – ,
Now would seem a great time to buy a home. Home prices and interest rates are lower. An $8,000 tax credit for first time buyers is still available. But would it be better to rent? For our regular Monday economy segment, we put that question to Ken Sibley, a certified public accountant. KERA's Sam Baker began by asking if - as many believe - it's always better to buy than rent.
Ken Sibley: There's a growing feeling that right now may be a better time to just simply rent.
Sam: Why is that?
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Sibley: Well the tax advantages are not as great as they used to be. Depending upon your income level, you can lose some of the tax benefits that were normally associated with owning a home. The other thing is, and I guess this has been more impressed upon people in the last 18 months, is the value of your house is subject to dropping. It doesn't always go up like it has for so many years and if the value is going to drop and it's your single most important investment, that can hurt.
Sam: That's certainly something to take into consideration if you're looking to get into the homeownership market.
Sibley: That's a good point because right now if you have the financial means to get into the market, hopefully we've seen all of the drop. So it maybe a great time to buy one of those reduced houses. You're getting a house on sale.
Sam: Pros of buying a home?
Sibley: It's yours. If you want to paint it pink, you can paint it pink. If you want to floor the attic, you can floor the attic.
Sam: But you have to spend a lot of money to get the tax advantage.
Sibley: It is a big commitment. If you're single, it's you, you're making that commitment. If you're married or you're buying it with someone else, everybody's going to be affected by making those payments and keeping up with the maintenance on the house, paying the taxes and the insurance and all the costs that are related to that. If you're financially prepared, it could be a great thing.
Sam: Pros and cons of renting?
Sibley: Pros: If your job takes you to another location, it's easy to move. You don't have to think about mowing the lawn or taking care of various maintenance items.
Sam: When you are thinking about buying or renting, what all should you take into account when you sit down and really give thought to it?
Sibley: If you can have on hand 15-20 percent of the cost of the house to put down, that's good. Your income needs to be very stable.
Sam: The belief of people who say that if you're renting, particularly if you're living in an apartment or something, you're just throwing your money away. Is that true or does it have to be true?
Sibley: It doesn't really have to be true because when you buy, you're banking on that appreciation so if that appreciation doesn't come, you may have thrown away your money in owning a house. If you're renting a house, granted you're not getting any tangible benefit, but I've got clients who are, frankly, pretty wealthy and they've never owned a house and they're in cash management positions so they're people who do investment type things and they don't own a house. It's an individual decision.
Sam: So what if you rent and then you say whatever the tax advantage for us is going to be make that your goal for saving or something, perhaps ?
Sibley: Exactly. That is a very good goal.
Sam: What is the prime reason when all is said and done for buying a home?
Sibley: Putting down roots. Being a part of the neighborhood. Being a part of your community. There are a lot of people who've lost a lot of value in their homes and their still quite happy with their homes. Their still not below what they paid for the homes or not appreciably below or they simply like where they are so much that even so, they'll stay there until it depreciates enough to make it break even.
Sam: It's home.
Sibley: It's home.
Ken Sibley is a certified public accountant and the founder and managing partner of Sibley & Company. You can see Ken's list of pros and cons for renting vs. buying at kera.org/economy.