Unlike the stock market, which is setting at record highs, the housing market has yet to recover from the depths of the last recession. While real estate sales and prices are trending higher and are clearly better off than they were a few years (or even months) ago, a full recovery is still far off.
That's not necessarily a bad thing, since it gives more people more time to take advantage of still low prices and interest rates. Nor is it a good thing, since it means as much as one-third of current homeowners are still underwater with their mortgages (eg. they owe more than the property is worth).
But with prices up, inquiries on the rise, and the spring selling season in full gear, it remains to be seen how this uptrend will play out.
For this installment of Investing 101, Shari Olefson, noted real estate attorney and author of the new book Financial Fresh Start, walks us through the basics of renting versus buying when it comes to making the investment of a lifetime.
1) Follow the "Rule of 15"
Before you make the decision to rent or buy, Olefson offers this rule of thumb: "If you can buy a home in your area for less than 15-times what your annual rent is, than financially it makes much more sense to buy than to rent."
For example, if you pay $2,000 a month in rent (or $24,000 a year), she says the basic buy-rent cutoff price would be $360,000.Read More »from Housing on the Rebound: Is it Better to Rent or Buy?