I’ve been running analysis on owning vs renting for over a year. Treasury rates and high home equity ratio pushed me to sell. Many have questioned by decision because my mortgage rate was so low (3.25%), however, of my $700k home value, over 50% was equity. Taking into account $1k after tax opportunity cost on my equity (assuming buying treasuries with my net cash after sale), selling my home and renting became extremely attractive.
My net cash expenses are now lower after accounting for reinvested equity. Additionally, my total cost to rent is lower than my previous total cost to own considering all items including .5% (1% is recommended) repair and replacement cost to maintain my previous home.
Rates can certainly move the other direction which will change the calculations, but I’m assuming if rates drop there is softening in the overall economy which should present buying opportunities in stocks, and possible declines in home values.
There seems to be significant asymmetry in housing where the odds of housing going down or flat lining from here seem much higher than the odds of housing going up, which makes valuing the opportunity cost on your home equity an important part of own vs rent analysis.
Note: another option was to keep my home as a rental, but my total cost to own was $2900 with repair and replacement. I could have rented my home for $4000 per month. The spread didn’t justify what I perceive to be the current risk in home values, and not having access to my equity compared to selling.
Are you valuing your home equity?
Submitted August 19, 2023 at 05:53AM by Clever_droidd https://ift.tt/IrSNByX
