This is one of the 21 tough financial questions posed in the “Do This or That?” cover story in the September 2011 issue of Kiplinger’s Personal Finance. Use the drop-down menu above to consider other financial conundrums and the right answers for you; share your own experiences and insights in the Discuss field at the bottom of this page.
Keep your rental if you love your footloose lifestyle (let the landlord take care of it!) or if you need time to save for a down payment or to improve your credit history. You should also put off the purchase decision if you can’t commit to staying in a home for at least five years—say, because you might want a bigger place for a growing family or you may move for a job. You would need that long to break even, given uncertainties about the direction of home prices and the transaction costs when you sell.
Buy soon if you plan to stay put for at least five years, you have the cash for a down payment and you don’t have to stretch to make payments. If you’re worried that home prices in your area may go lower, make a rough estimate of your city’s price-rent ratio: Divide the average list price of several homes that meet your criteria by the average annual rent of several places with the same number of bedrooms and comparable amenities. In general, if your market’s ratio is less than 15, you can start house-hunting with confidence; if the ratio is 15 to 20, be cautious; and if it’s over 20, stick with renting.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
SEE ALSO:
QUIZ: How Smart a Home Buyer Are You?
-
AI Goes To SchoolThe Kiplinger Letter Artificial intelligence is rapidly heading to K-12 classrooms nationwide. Expect tech companies to cash in on the fast-emerging trend.
-
Where to Invest in an Uncertain MarketIn an uncertain market, you can still pocket juicy payouts ranging from 4% to 14%, depending on risk.
-
How to Search For Foreclosures Near You: Best Websites for ListingsMaking Your Money Last Searching for a foreclosed home? These top-rated foreclosure websites — including free, paid and government options — can help you find listings near you.
-
Luxury Home Prices Rise as the Rich Dodge High Mortgage RatesLuxury home prices rose 9% to the highest third-quarter level on record, Redfin reports, growing nearly three times faster than non-luxury prices.
-
Four Tips for Renting Out Your Home on Airbnbreal estate Here's what you should know before listing your home on Airbnb.
-
Five Ways to Shop for a Low Mortgage RateBecoming a Homeowner Mortgage rates are high this year, but you can still find an affordable loan with these tips.
-
Looking to Relocate? Plan for Climate Changebuying a home Extreme weather events are on the rise. If you’re moving, make sure your new home is protected from climate change disasters.
-
Retirees, A Healthy Condo Has a Flush Reserve FundSmart Buying Reserve funds for a third of homeowner and condo associations have insufficient cash, experts say. Here are some cautionary steps you should take.
-
Cash Home Buyers: New Services Offer Help Making All-Cash OffersBecoming a Homeowner Some firms help home buyers make all-cash offers on homes. Weigh the fees before you sign on.
-
Home Sale Prices in the 50 Largest Metro AreasBecoming a Homeowner What’s happening in the market where you live?
