7. Rent versus buy - The theory behind the analysis Based on the theory, which is better: to rent or to buy? The decision of whether to rent or buy your housing is a personal decision that is based on both your lifestyle and your finances. While the financial aspect of the decision is important, it is important not to base your rent-or-buy decision solely on the numbers. Your personal needs and housing market conditions are important. The freedom to decide what, when, and what color youre going to paint cant be quantified, but it is very relevant to the rent-or-buy discussion. What are the theoretical and lifestyle aspects of the rent-versus-buy decision? Among the personal and lifestyle factors that are relevant to this decision are: Your desire forprivacy Your desire to fix up your living space andmake it your own The personalsatisfaction that results from homeownership Read each of the following situations and determine whether it makes more financial sense to rent or to buy the home. Deborah and Spouse Deborah and her husband are trying to decide whether to rent or to purchase a new standalone house. As 30-somethings, they have just relocated to a new city to accommodate their jobs and have had their first child. Their current bills consume 90% of their combined monthly incomes, and they used virtually all of their savings to pay their pregnancy-related medical expenses. Based solely on these factors and assuming that everything else remained constant, should Deborah and her spouse rent or purchase? Rent Purchase Megan Megan is trying to decide whether to rent or to purchase a new townhouse. To help make her decision, shes been watching current and expected future mortgage interest rates and home values. Her interpretation of the data suggests that interest rates are likely to decrease in the next three months, while home values are likely to increase. Based solely on these factors and assuming that everything else remained constant, should Megan rent or purchase? Rent Purchase Several financial or economic factors are relevant to the rent-or-buy decision. From the following list, identify the financial or economic factors that should be considered when performing this analysis. Check all that apply. The pride that comes from owning your own home Current and expected future housing-related tax deductions Whether you want to deal with the repairs and maintenance of the home