If renters could go back a few years, a significant number of them wouldn’t rent in the first place.
According to a new survey from real estate site Trulia, the top regret among renters was deciding to rent rather than buy a home: 41 percent “wish they had bought instead.” Unfortunately, more than half of all renters believe they couldn’t afford to buy, and data shows that many of them could be right.
Still, some renters may have been too cautious following the housing crisis, reasoned David Weidner, managing editor for Trulia’s housing economics research team. Ultimately, “in every U.S. major market, it’s cheaper to buy a home than it is to rent … over seven years,” he said.
In general, it’s best to buy when you have your eye on the “long-term horizon,” and most experts agree that you shouldn’t own unless you plan on staying in the home for at least five years.
As Harold Pollack and Helaine Olen write their personal finance book “The Index Card”: “Homeownership, like stock investing, works best as a long-term proposition. It takes at least five years to have a reasonable chance of breaking even on a housing purchase. For the first few years, your mortgage payments mostly pay off the interest and not the principal.”
Of course, deciding whether to rent or buy boils down to more than how long you’re planning on staying put. You’ll want to figure out exactly how much home you can afford, have cash for a down payment and prepare for the hidden costs of owning a home. There are crucial other steps to take, too.
If homeownership is the right decision for you, while you’re shopping, make sure to consider the No. 1 mistake buyers told Trulia they made: choosing a home that’s the wrong size.