We’ve mentioned a few times on here that potential homebuyers are hesitant to purchase property and, instead, will opt for renting, at least until the job market and economy stabilizes. As a result, residential properties are left empty or are purchased for renting. But, while renting, at least from past experiences, appears to be the financially-sound option, buying ends up being cheaper in a significant amount of U.S. cities, according to CNN Money.

In 74 percent of the nation’s 50 largest cities, purchasing a home costs less than renting and has more perks over time; the only places where renting is cheaper, however, are New York, Sam Francisco, and Seattle. Because of the steep drop in home prices since 2006, a two-bed, two-bath condo or house ends up costing less in the long run. Additionally, low interest rates for 15- and 30-year fixed rate mortgages also make buying more economical at this time.

Some of the best places for buying, however, are those with the greatest drop in prices, such as Las Vegas and Detroit. The market in the gambling mecca dropped 59 percent since 2006, and as a result, the average price for a two-bed, two-bath home is $60,000. Detroit, as well, is another market in which buying is significantly cheaper than renting for the same factors.

At the same time, not everyone should be purchasing a home. A spokesperson for Trulia, quoted in the CNN Money piece, stated: “It’s a personal decision, of course. But if you have a steady job and you are planning to stay for seven years or more and have enough cash to put 20% down and enough left over for seven or eight months of expenses, you’re better off buying in most places.”

So, what factors should you consider? If you’re in a stable financial position, ask yourself how long you plan to stay, how much you need to put down, how much will total homeownership costs be, and if you can claim the tax advantages of homeownership.

As God is my witness, I will never… own a home again?

Recently, James Altucher, the managing director of Formula Capital and a successful blogger, published a piece about why you should never buy a home. As housing prices are still low, many advise investing, but Altucher, even with the sarcasm and slightly melodramatic attitude, thinks purchasing a home is a waste of money, an amount you will never recover. As an investment, it results in small returns and, over the years, ends up costing a significant amount in taxes and maintenance.

So, what are Altucher’s reasons? Although his post goes into more detail, his general points are:
• Homes require a large down payment, and you will never recover this loss. Rather, you will earn money from selling the property for a new one, but as that money goes toward a new home, your initial large down payment never returns.
• Homes are poor investments. Altucher claims properties have only had a 0.4-percent yearly return since 1890.
• Closing costs and regular maintenance are more money losses.
• Tax returns from mortgage payments are only small, and you end up paying more in taxes on your home.
• Home owning is antiquated. The last time the average person could own a home, he worked in a company close by and, because of distance, had fewer job options. This is no longer the case, and as deindustrialization dismantled the factory town, workers now need to travel farther to jobs with salaries that did not keep up with the price of buying a home.

Do you agree with Altucher, that renting is far more beneficial to financial stability and investment than purchasing a home? Not all professionals do. As we saw a month ago, other professionals state the opposite and claim that now is the ideal time for purchasing a home for your family or as an investment.

Much like the banking industry experienced severe revisions over the past two years, the real estate industry, particularly home buying, may go through a similar type of change over the next few years, according to a story in U.S. News. Government regulation of real estate, with practices and standards that have been in place since the 1930s, may change, taking a lesser role than that of the present. The U.S. News piece provides more details, but with less government involvement in real estate, some of the changes homebuyers may experience could include:
• Increased mortgage rates
• Formal down payments on loans as much as 20 to 30 percent
• Less federal backing for high mortgages
• Fewer 30-year rate fixed mortgages
• Fewer homeowners and more foreclosures
• Fewer investment, or “volatile,” properties

When it comes to being a homebuyer, these changes may have a significant impact on buying a home in any state. Generally, the process for looking and purchasing a home presently includes:
• Defining what you want out of a new home
• Checking your credit, getting pre-approved for a mortgage, and finding a lender
• Finding an agent
• Looking at homes for sale
• Escrow, inspection, and appraisal
• Moving in

New changes, then, would impact steps two and six of the home buying process. Obtaining a mortgage would be more difficult, and interest rates, which were low before the housing market collapse and are still relatively low in the present, may be higher than those currently.

Securing the home through escrow, similarly means a larger down payment. If the home you want to buy is $200,000, a 20 to 30-percent down payment would be $40,000 or $60,000.

If you’re planning to buy a home, what does this mean for you? At the moment, these are simply predictions – not actual changes to the real estate industry. Nevertheless, it means that, if you plan to purchase a home in the future, be prepared to expect higher rates and a significant down payment.