I have long been committed to low-rent, public transit, downtown living in the belief that having low overhead (no home maintenance, no car, no parking) means that I can spend my cash on what matters to me (travel, British mystery novels, M&Ms). But a catchy mortgage ad campaign launched by a leading Canadian bank has me a bit stirred up. Reclining on a leather chaise, martini in hand, city lights twinkling in the background, a sleek 20-something urges me on: “turn your rent payments into ‘own’ payments.” Is it time to start HomeBuying I wonder?
Apparently, the feeling is an annual thing. Blogging early in the season, Andrew at BlogTO points out that warmer weather nurtures a perennial debate between “boosters,” those who believe that it’s always good to buy real estate assets, and “bubblers,” those who warn against it given poor market conditions. The truth, it turns out, lies somewhere in the middle.
There are many issues to consider in becoming a first-time (or second-time around) HomeBuyer. Current economic conditions—interest rates, hot markets, employment figures—drive major consumer trends that affect your decision-making. A New York Times article recently suggested that in some U.S. markets, renting rather than buying may be a prudent move. But Andrew warns against jumping to similar conclusions about Canadian markets which have not experienced the real estate slowdown seen south of the border. Check out the Times’ helpful online calculator which tailors rent vs. own comparisons to your local conditions.
Along with economic realities, it is important to consider your personal life circumstances and lifestyle choices when you ask yourself whether HomeOwnership is right for you.
If you have to make a major life decision that may necessitate a move (for love, work or school), being a short-term HomeOwner may not be ideal. You may lack the time you need to ride out minor market downturns in order to sell high enough to break even (learn more about the financial pros and cons associated with HomeOwnership).
It is also important to put your lifestyle choices under the microscope. I choose to rent in older, low-rent buildings in order to stay ahead of the growing cost of living in Canada’s urban cores. What if HomeOwnership means moving out of the city-centre to a more affordable area? Since this would impact daily rituals that are important to me, such as walking to work or cycling to the local bakery, I need to establish what trade offs I could—and could not—live with.
Deciding on HomeOwnership is no easy task. Happily, there are a number of options that may meet your needs, from buying in an up-and-coming neighbourhood to renting out part of the home you buy (more on these options in future posts). Start early and think about the economic realities, life circumstances and lifestyle choices that affect you, even if you don’t see yourself as a HomeOwner just yet. Good real estate agents will be happy to consult with you even if you don’t plan to buy right away. You never know when opportunity may knock—keeping a clear-headed response in your back pocket may come in handy.
Urmi Desai is an economic analyst and a freelance writer specializing in urban issues.
July 11, 2007Buying |