Question: I want to buy a house. Is that a good idea?
Advice from the Lab: It depends on, but you shouldn't spend more than 30% of your income and shouldn’t buy if you won’t be there 5 years.
The decision to buy a house is often the most important financial decision most individuals will face. While it’s comforting to many to own their home, there are many misconceptions about the benefits of buying a house. There are a number of large costs, beyond just getting and paying a mortgage (realtor fees, maintenance, taxes), when you’re buying a house. Prices can fluctuate dramatically, as we learned in 2009, making it hard to sell a house and move during a time when moving might be critical for finding a job during a down market.
Beware of the ostrich effect when deciding to buy a house. The ostrich effect is about avoiding bad news. Often people first decided to buy a home and then start doing the research. With the decision to buy already firm in their minds, it is easy to ignore information that suggests renting might be a better decision.
Of course, there are plenty of benefits to owning property as well. Prices, location, and individual finances make this question pretty tough to answer in a few paragraphs. However, this useful calculator from the New York Times is an excellent tool that can help you determine if now is the right time to buy.