Buying a home isn’t called the American Dream for nothing. The phrase captures the desire to put down roots, create a space that’s truly your own and invest in a solid financial future.
Recent statistics indicate that in 2022 nearly 66% of Americans owned a home and 34% rented. The sizeable population renting amounts to 44.1 million households. Understanding the many benefits of buying vs. renting may encourage those households to act sooner than later in purchasing a home.
“Most people know that owning a home provides important financial benefits,” says Angela Walters, 2023 chair of the Greater Milwaukee Association of REALTORS (GMAR) board of directors and owner of Walters Realty Group at EXP Realty. “Understanding some of the lesser-known benefits of buying vs. renting can instill even more confidence in the decision to buy.”
Financial Advantages
One of the first financial benefits available to new homeowners are tax advantages that don’t apply to renters. Under the U.S. Tax Code, homeowners can deduct interest paid on a mortgage, property taxes and some of the costs related to buying a home. In addition, if mortgage insurance is part of the monthly mortgage payment, it could qualify as a deduction on taxable income.
Since fewer people now itemize deductions under the current tax code, it’s important to note that when homeowners decide to sell, any appreciation in the home’s value is exempt from capital gains tax. This exemption is $250,000 of “net gain” for single tax filers and $500,000 for couples, which covers most home sellers in the greater Milwaukee area market.
According to Jeremy Rynders, a REALTOR with Lifetime Realty Group – Keller Williams, homeownership offers other longer term advantages, too. “Real estate consistently increases in value,” says Rynders. “Even in fluctuating market conditions, houses will almost always appreciate over time.”
Rynders also notes that buying provides stability. “When you buy a home, you typically lock in your monthly payment, making it a predictable fixed expense versus rent that can change anytime your lease is up,” he says.
Finally, unlike rent, which goes to a landlord’s bank account, mortgage payments build equity.
“Building equity is a ready-made savings plan that consistently increases wealth over time,” Rynders says. “In addition, a home can be passed on to children, increasing their financial well-being as well.”
Improved Health
Building wealth builds health. Homeownership, and the sense of control it provides to homeowners, contributes to positive mental health. In a Freddie Mac survey, 91% of respondents agreed that owning a home was something to be proud of and 76% said that it was a sign of success.
“The unpredictability of rent increases can cause frustration and stress,” says Vickie Kelsall, a REALTOR with Century 21 Affiliated. “Homeownership, on the other hand, promotes a sense of accomplishment and pride.”
Research from Canada and other countries around the world has found that homeownership contributes to higher levels of happiness and life satisfaction for both homeowners and their families.
Better Academic Performance
Renters with children who are contemplating buying a home will be pleased to know that homeownership boosts educational achievements.
A 2016 NAR report, as well as a study in the Journal of Urban Economics, found that children of homeowners outperform children of renting families in both math and reading achievement tests.
Mike Kollmansberger, real estate broker with Shorewest Realtors, understands the educational value associated with homeownership. “I point out locations of schools and direct buyers to resources where they can learn more about the public and private schools in the area,” says Kollmansberger. “I often connect buyers who are new to the area with other families who are able to offer their knowledge and school connections.”
A Sense of Belonging
The stability that comes with owning a home fosters strong community spirit.
Several studies have found that homeowners tend to be more involved in their communities than renters. They are more likely to engage in civic organizations and local events. Plus, relationships formed in a neighborhood benefit everyone in the family by providing continuity and meaningful connections.
The REALTOR Advantage
A REALTOR is a member of the National Association of REALTORS, is committed to a Code of Ethics and has the expertise to find the right home for everyone. Look for the “R” to determine if your agent is a REALTOR.
Locally, the Greater Milwaukee Association of REALTORS is a 5,500-member strong professional organization dedicated to providing information, services and products to help Realtors help their clients buy and sell real estate. Visit gmar.com for more information.