Myth #1: Buying a home is a great investment
If the housing bust taught us anything, it’s that the housing market can be just as risky as the stock market — if not, worse. Homes lost a third of their value nationwideand some markets took an even bigger hit.
Over the past 10 years, home prices have risen just 0.3% annually, while the S&P 500 has returned an average of 8.26%.
There are, of course, other factors that can eat even further into those returns, such as maintenance. Have to repair the leaky roof? That will be $500. Need a new water heater? That’s another grand.
Myth #2: Buying is always better than renting
Now that the housing recovery has taken hold, some markets have become way too expensive for homebuyers.
One quick way to figure out whether to buy or not: If the home costs more than 15 times the annual cost of renting a similar home, you’re better off renting.
In Manhattan, for example,the average cost of buying a house is about 24 times the average cost of renting one.