Jumping through hoops, overcoming obstacles, tackling hurdles - this is either Field Day at Brackett School, or the past few years in real estate. Luckily, most signs are pointing to a recovery - although it looks like slow and steady will win this race.
As the market regroups and recovers, the rules of the game are also changing with it. Tactics for securing homeownership that might have worked a year ago (i.e., the lowball offer) are shifting.
One of these shifts involves the Rent vs. Buy dynamic. There are a number of reasons why one might rent rather than by, and vice versa, and there can be tangible and intangible benefits to both. For example:
It can make sense to rent when home values are falling (and will do so for some time). This will prevent a loss on the purchase of a home. Or, renting is an alternative when short-term housing is needed. For example, you're relocating for a job, or you're saving for a down payment. And of course it makes sense to rent if you're unsure of a new location and want to test it out to be sure it suits your lifestyle.
The 'hurdle rate' is one measure which people rely on to determine whether to rent or buy. A hurdle rate is the point at which it's equally smart to rent or buy if your only criterion is to build wealth.
Experts have declared that today's hurdle rate is lower than average past property appreciation rates, making Buy vs. Rent the preferred option for prospective homeowners. Why? Because things are looking up: