Realty Reaction

In the short run, renting often makes more financial sense than buying, in terms of how much shelter one can afford for a given price.

Rents tend to be an accurate reflection of the free-market pricing of housing simply as shelter. But the ownership cost of a house or condominium is a combination of both shelter value and investment expectation.

So at any given moment, you can usually rent an apartment or house for less than the monthly carrying costs that a buyer of that property would have to pay to carry it through the early years of ownership.

This explains why many young people can’t afford to own the very condominium that they’ve been renting with no financial strain, or why a young family might be able to rent a much fancier, more spacious house than they would be able to buy.

That’s the short-run picture, but the long-range view is different. Over time, rents tend to rise, but the basic cost of owning your own home - the monthly payment of principal and intereststays the same. Combined with a record of price appreciation, this is what makes homeownership financially attractive in the long run.

Until the “long run” arrives, however, you may have to make some sacrifices to become a homeowner. You may have to put up with less space if you have to pay more to own a small home than to rent a larger one. To find a house you can afford, you might have to move to a location farther from your job and favorite haunts; that means extra traveling cost and possibly two cars for your household, where one used to suffice.