As a homeowner, you can reasonably expect the equity in your home to increase over time as your mortgage is paid down. That, combined with regular appreciation in property values, can be a rapid and rewarding way to increase your net worth. In contrast, the person renting over the same amount of time is left with no property investment but may have enjoyed lower living expenses and the opportunity to invest in other opportunities.
When comparing owning to renting, you have to add up all of the figures, including the cost of your home, the size of your down payment, utilities, immediate repairs, interest rates and insurance, and compare them with how much you are currently spending on rent.
Of course, you also have to place a value on the enjoyment and satisfaction that you will derive from owning your own home.
Least but not last, the state of the housing market should ultimately determine if one should invest in real estate or rent first, save some money, and wait for favourable market conditions to buy.
For a snapshot of the Real Estate market one can look at the Canadian Housing Starts:
December Result: 185,000 units
TD Bank’s forecast: 215,000
Canadian Employment Figures:
December Result: -19,000; unemployment rate 5.9%
TD Bank’s Forecast: 10,000; unemployment rate 6.0%
According to the TD Bank we should expect to see housing starts rebound in January to 215,000, after falling to only 185,000 in December. The TD’s December report mentioned that a lot of the weakness in housing starts was due to bad weather, which is unlikely to be a negative factor again in January, since the temperature was actually a little higher than usual. Residential building permits have remained strong and general economic conditions in Canada remain healthy, this would lead one to believe that the extreme softness in December was a unique event, and that housing starts will slow only gradually through 2008.
This week, in a speech, Central Bank officials reiterated that, “further monetary stimulus is likely to
be required in the near term to keep aggregate supply and demand in balance, and to return inflation to target over the medium term.” In the TD Bank’s opinion, this builds the case for rate cuts at the next two fixed announcement dates, with as much as 75 basis points of easing to come.