6.5 Reasons You Should Buy vs. Rent Your Hawaii Home

As I continue to read and stay up on current real estate markets, I ran across this from Trulia, which we use to market our listings. They have the best information on anything related to our industry. I continue to meet new clients that are the “glass is half full types,” pessimists to the extreme. They want homes or oceanfront condos for under $150K on Maui!! Are you kidding me? Despite what’s going on in the mainland, this is MAUI, the #1 island in the world. We will never be valueless like many markets have become.

Anyway, enough ranting, the time is right to buy some property here on Maui. I like to call it the perfect storm. Rates are still very low, but starting to rise and our prices are still very low, but some inventory has started to shrink. An example, would be the usually very affordable condos in Kihei, known as Kihei Villages and Southpoint; there has been 15 to 20 always on the market in there with foreclosures and short sales.

As of today, only 3 are listed. Things are selling. Read this blog and then call me. Let’s get you the right place now! Home ownership has its privileges, although until recently, discussions of what exactly they are have been overly focused on the obviously flawed, “always goes up” argument about the appreciation of American homes. Well, that bubble has burst—literally.

The idea that you should buy a home if for no other reason than that it’s a fabulous investment is a bit passé in today’s environment of rolled-back home values and upside down mortgages. Whether or not it’s time to ditch the home-as-investment argument, there are oodles of other reasons it makes sense to buy your home, compared with renting, even assuming its value would stay fairly flat, or increase only modestly over the years.

Here are 6.5 other worthwhile reasons to own your home versus renting it—assuming, of course, that your finances and credit make ownership a sensible and sustainable move for you to make:

1. You’ve always wanted to.

Many Americans simply believe in home ownership. This holds true even after the bubble! In a recent study Trulia commissioned with Harris Interactive in August 2010, 72 percent of Americans surveyed stated that home ownership is still a part of their personal American dream.

Owning a home because it’s something you’ve always wanted to do—whether because you’ve got a vision of life in a home that belongs to your family, or because you’ve always dreamed of owning a fixer, or because it’s simply a family or financial value you hold dear—is probably one of the better motivations for buying a home. (And it’s certainly better than buying it because you think you’re supposed to.)

2. You earn enough to need the tax break.

One-hundred percent of your mortgage interest (the largest part of your monthly mortgage payments) and your property taxes are tax deductible! That’s right—Uncle Sam imposes a very strong tax incentive for those who do own their homes.

However, even renters are able to take a standard tax deduction, so the true tax advantages of home ownership don’t begin accruing unless and until you:

• earn enough to be able to benefit from a tax deduction greater than the standard
• are paying enough mortgage interest and property taxes to accrue a tax deduction larger than the standard deduction

This is definitely situation-specific; check in with your tax preparer or adviser to find out whether the tax advantages of home ownership would be of benefit to you. And, FYI—there are even some additional temporary tax incentives for homeowners; if you put less than 20 percent down on your home loan, the private mortgage insurance premium your lender will require you to pay is also fully, or partially deductible (depending on your household income) through 2010.

3. You love a deal.

You might have heard by now that home prices have rolled back to 2003 levels, and interest rates are bizarrely low—right around 4.45 percent on a 30-year-fixed rate mortgage. If you’ve always had a house hankering and you’re one of those types who just loves a good deal, it might be a good time to get serious about buying.

Depending on your market, prices will probably stay relatively flat for a little while, so even if you need to put a savings-and-credit-building plan in place, you might have time to build up your reserves, boost your FICO score, and still get a great deal. Get to work!

4. You want your children to grow up in a home you own.

The financial and life management skills required to be a homeowner—like budgeting, making a large financial goal—and meeting it, and staying in the same community over time—tend to get passed down to homeowners’ children, as if by osmosis! Kids whose parents own their home have a lower school dropout rate, teen pregnancy rate, and even raises educational achievement and earnings.

It’s not clear whether this is due strictly to home ownership, or to the fact that kids of homeowners tend to move around less than children of renters, but what is clear is that growing up in a home their parents own increases children’s chances of doing well in life.

5. You plan to stay put.

Rents rise over time. Landlords can evict you—in many places—when they decide to sell the place, or otherwise due to no fault of yours. If you know you plan to live in the same town or even neighborhood for years to come, owning your home may be one of the best hedges against being forced to move, or pay higher rents—especially if you lock in a low-interest, 30-year fixed rate loan.

30 years from now, you could be without a housing payment at all, other than taxes and insurance, which are forever. The ideal is to be committed to staying put for 7 years (plus or minus a year or two, depending on your market), before making the commitment to owning a home makes sense.

6. You want to customize your home.

Whether you want to invest your time, money, and creativity into a backyard skate park for the neighborhood kids, or you’d rather build an addition for a greenhouse/yoga room, whether your vision of home has always included extensive built-in shelving to showcase your sports memorabilia collection, or that chef’s kitchen, so you can replicate the Top Chef contestants’ latest creations, if you are looking to create a significantly customized home (for your significantly customized life!), there are some things you will only be able to do in a home that you own, rather than a rental home.

6.5. You want to eventually own your home free and clear.

If you ever want to own the place you live, free and clear of a mortgage, or the obligation to pay rent, the only way to make that happen is to buy your home (and not keep refinancing, or extending the term of your loan once you do!).

Feel free to call me with any questions. This is what I do.