WASHINGTON (Reuters) - U.S. home sales increased more than expected in October as hurricane-related disruptions dissipated, but a chronic shortage of houses which is pushing prices beyond the reach of some first-time buyers remains an obstacle.
The National Association of Realtors said on Tuesday that existing home sales rose 2.0 percent to a seasonally adjusted annual rate of 5.48 million units last month. September's sales pace was revised down to 5.37 million units from the previously reported 5.39 million units.
10 financial reasons to never buy a house:
10 financial reasons to never buy a home
10 financial reasons to never buy a home
1. Your Mortgage Might Exceed Your Rent
One reason for renting is simply that it's cheaper than owning a home. In fact, a recent GOBankingRates study of rent and mortgage costs found it's cheaper to rent in 11 states across the country, plus the District of Columbia.
If you're weighing your options, Barton suggests totaling all rent costs — including the monthly rent payment, deposits, pet fees and service charges — and then comparing that figure to the total mortgage payment on an equivalent property. That will help you determine whether owning a property is really more affordable.
According to the Tax Foundation, the three states with the highest property tax rates all exceed 2 percent, with New Jersey at 2.35 percent, Illinois at 2.3 percent and New Hampshire at 2.15 percent. At New Jersey's median home value of $315,900, that means paying $7,423 in property taxes.
Keep in mind, though, that renting might not save you completely from high property taxes, since some of those costs likely will be passed on to you by the owner of your unit. Luckily, as a renter, you can often find a cheaper place to live if your landlord bumps your rent too high.
3. You’ll Have to Buy Homeowners Insurance
Homeowners insurance varies depending on what insurance company you use, how much your home is worth and the claims history in your area, among other factors. But whatever your situation, insurance will cost something — and it's just another cost to tack onto your cost of living.
"Homeownership is a long-term financial commitment," said Jose Tijam, a realtor with Grand Avenue Realty & Lending in California. "Your lender requires you to insure your property, and typically you have to pay insurance premiums along with your mortgage payment."
4. The Market Is Volatile
Is the U.S. on the verge of another real estate bubble? Maybe not, but in 2007, many homeowners found out the hard way that housing prices can be variable. Homeowners who bought at the peak in 2006 faced huge losses in 2008.
Home values and costs are variable depending on market fluctuations. That means you might spend more money on your home than it will be worth when you’re ready to sell.
"There’s no guarantee that your home will increase in value over time," said Tijam.
5. Maintenance Can Break Your Budget
Will you be able to pay to replace the furnace if it breaks? Can you afford to repair or replace the roof if it leaks?
Some experts recommend you set aside 1 percent of the purchase price of your home each year to pay for maintenance and repair costs. That amounts to $3,000 every year, if your home cost $300,000. If your home is older, though, you'll want to set aside even more.
Renters, on the other hand, get to call their landlords to handle repairs around the unit. When you sign your lease, you can even ask for a fresh coat of paint, which, for the average home, costs $2,764, according to HomeAdvisor, rather than hiring painters or going the DIY route.
While some of these costs might be passed on to you as a renter, it likely won't be until it's time to renegotiate your lease. But the cost isn’t necessarily the worst part of required homeownership maintenance.
"If you don’t want to do yard work, renovations and upkeep, renting might be the best option for convenience," said Barton.
6. Selling a Home Is Burdensome
Nobody wants to be saddled with an extra mortgage or home they can’t afford. Renting allows the flexibility to leave if your financial or life situation changes. But if you own a home and have to leave for any reason, you’ll end up having to pay for that home — mortgage, taxes, maintenance and all — until you’re able to sell.
If you’re not planning to stay in the same place for more than a few years, you should rent to avoid serious financial problems, said Deb Tomaro, a broker associate with RE/MAX Acclaimed Properties in Bloomington, Ind.
The worst time to buy is when your job or life situation is unstable. For example, Tomaro said she worked with a client who was going through a divorce and was set on buying a new home immediately after moving out of the marital home. An unstable period like that isn’t the time to make such a huge financial decision, she said.
“I know he’s going through a tough time in his life, but he doesn’t have the same excitement about the home-buying process that most people have, and that is disappointing to me," she said. "That’s usually a sign that it’s not quite the right time to buy."
hand holding drawing house, blue arrow and dollars
8. Your Down Payment Could Earn More Elsewhere
Historically, buying a home isn’t the best performing investment for your hard-earned cash, appreciating at only 3 percent per year. On the other hand, since its inception in 1926, the S&P 500 has returned an average of 9.8 percent per year, according to CNBC.
Yes, both stocks and homes can also lose value. But, with stocks, when you sell, at least you can deduct the loss on your tax return. You can’t deduct the loss on the sale of your home if the market tanks.
9. A Mortgage Might Not Lower Your Taxes
Mortgage interest only reduces your taxable income rather than your tax bill, so the amount you save depends on your marginal tax rate. For example, if you fall in the 25 percent tax bracket, you’ll save 25 cents in taxes for every dollar you pay in interest. Plus, to claim the mortgage interest deduction, you must itemize your deductions. This means you must give up the standard deduction, which is $6,350 for singles, $9,350 for heads of household, and $12,700 for couples filing jointly. Other itemized deductions include state and local income taxes, real estate taxes and charitable contributions. So, your mortgage interest deduction only reduces your tax bill to the extent that your itemized deductions exceed your standard deduction.
10. You Might Not Be Able to Move
If you need to move for any reason, whether your company relocated you or you just found another house or neighborhood you like more, expect to pay a 5 percent or 6 percent commission to the real estate agents, plus potentially chipping in for closing costs, depending on your market. For example, if you have to sell your $200,000 home, even if you can get full asking price, $12,000 plus closing costs will be deducted, which could easily offset any short-term savings of renting. Plus, if you are offered a dream job — or even just a better opportunity — in another city, you might have to turn down the opportunity if you are tied to a house you can't sell.
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Economists polled by Reuters had forecast home sales rising 0.7 percent to a 5.42 million-unit rate in October. The NAR said sales in Houston and Jacksonville, regions which bore the brunt of Hurricanes Harvey and Irma, had rebounded. Sales in South Florida, however, remained weak last month.
Sales in the South, which accounts for almost half of the existing homes sales market, increased 1.9 percent last month. There were also gains in sales in the Northeast, Midwest and West regions.
Existing home sales make up about 90 percent of U.S. home sales. They fell 0.9 percent on a year-on-year basis in October.
Home sales remained well below a 10-year-high 5.70 million-unit pace touched in March. Sales have been restrained by an acute shortage of properties, which is exerting upward pressure on house prices, and sidelining some first-time buyers.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci)