Inspired by Metroplexual’s suggestion to read the NJ Real Estate Report (linked on our sidebar now), I came across a post that compared renting a home to owning a home. In truth, the article was linked from another source, but it gave some interesting points of view on the classic owning vs. renting debate. For my part, after I read Rich Dad, Poor Dad series I began thinking about money in a different way. What I like about the article linked on the NJ Real Estate Report is that it talks about some of the same principles (in a roundabout type of way) that Rich Dad, Poor Dad talks about. For example…

The NJ Real Estate Report post lists 5 different reasons why you should rent instead of own. One of these reasons is because it’s cheaper. The post says:

Cheaper. When you consider the cost of being a homeowner — mortgage payments, association dues, property insurance, property taxes, repairs, maintenance and upgrades to protect your home’s value — most of the time, renting will be cheaper.

This is true. The financial planners who subscribe to the theory that a home is one’s biggest asset are at odds with these realities. Assets should appreciate in value (not in this market!) and they really shouldn’t cost you too much money. Look at the costs above from a New Jersey perspective: mortgage payments are between $1200 and $1500 depending on the size of your mortgage and the rates; I’ve seen association dues range from $175 per month to $350 per month; property taxes are out of control in New Jersey and for the places that I’ve been looking at, they are around $4000 per year; repairs, maintenance, and upgrades – let’s place a conservative $200 per month into this pot. All in all, you could wind up spending $2400 per month on your house alone! That doesn’t take into account utility bills, food, gas, clothing, etc.

Now, as the Rich Dad, Poor Dad series taught me, let’s say you spend $1000 per month on rent. That leaves about $1400 open each month. If you were to sock that $1400 away in a the stock market, a high-yield savings account, even bonds – you’d get a higher annual return than your house would appreciate. This ridiculous current housing bubble aside, houses appreciate between 3% and 7% per year depending on market factors. Long-term returns from the stock market show double-digit gains for investors.

Makes you think – is it really worth losing money to own a house?

USA Today is reporting that new home sales have dropped – again – to their lowest point in some sixteen and a half years. Well…duh. Is anyone surprised by this news? We have a horrible economy and that certainly isn’t helping, but has anyone actually looked at the price of a new home these days? It’s outrageous! That is, of course, unless you want to live in the Ozarks somewhere or unless you have Mommy and Daddy money paying for the home.

Speaking for young adults in New Jersey, it is almost virtually impossible to buy any home (new or used) that is on the market. Property taxes, car insurance, student loans, groceries, gas, cell phone service, cable service – everything costs way too much money per month for anyone to buy a home. For a young, single guy like me bringing in a one-person income – forget about it! But I even know married couples who are having a hard time putting together enough money to buy a home in a place where they actually want to live in this state.

Times are tough and it sucks.