Abberly Crest Blog

When deciding whether to rent or buy, you are making the choice to rent an apartment home or renting the capital needed to buy a home. Most Americans don't consider that they are renting equity (from the bank) to buy a home. As you are aware, very little equity is built in the first few years of paying a mortgage. Many people are surprisingly still very unaware of this fact.

This following article explains how renting is financially better than buying in about 75% of cases!

For the Past 30 Years, Renting Was Generally Better Than Buying

If homeownership is the American dream, then the nation had better wake up. That's the message from a new research paper that examines whether buying or renting a home was a better financial decision over the past 30 years. Most would find the result surprising: over the period Americans were better off renting between 65% and 75% of the time, depending on the investment alternative.

The article essentially looks at eight-year periods and assumes that a person invests the money he or she saves by renting. Since buying is generally more expensive than renting, renters have extra money to invest. It also makes a number of assumptions favorable to homeownership, including gains from the mortgage interest tax deduction, the option to refinance, and the ability to walk away -- loss-free -- from an underwater mortgage. Still, renting wins approximately three-quarters of the time.

The staff at economic research organization e21 explains why this result actually shouldn't be so shocking:

Counter-intuitive as the finding may be to some, it is actually quite logical. Unless someone possesses the cash necessary to buy a residence, he or she will be renting one way or another. The choice is between renting the property directly or instead renting the capital necessary to buy the property. The amount of capital to be rented is a function of house prices, while the bulk of a mortgage payment is interest, which is the rental payment on this capital. After 2 years, the typical 30-year amortizing mortgage balance has been reduced by less than 3%. This means that a household that took out a $300,000 mortgage with a 5% interest rate to buy a home has only reduced its mortgage balance by $8,600 after two years despite spending nearly $39,000 in total over this period.

Housing advocates may respond by pointing out that at least the $8,600 in this scenario went towards home equity rather than simply being squandered on rent. But, as demonstrated in the Real Estate Economics article, the principal component of each mortgage payment - i.e. the portion of the mortgage payment that goes towards reducing the principal mortgage balance instead of interest - is an added expense renters don't have.

This turns the real estate industry's biggest talking point on its head: you aren't throwing rent into the wind each month, you're casting away equity.

Of course, that equity also provides a potential benefit. The analysis's eight-year rolling methodology appears to miss the biggest reward of owning a home: living rent-free once the home is paid off. After that 30-years is up, the longer a family remains in that home rent-free, the more buying pays off. Taking this into account would almost certainly change the result in some, if not all situations. Renting may be a better option initially, but there's no eventual reward.

An important point still needs to be made here: buying a home that you don't plan to live in for an extended period of time probably isn't a great idea. The rent you pay in the form of interest on a 30-year loan for five or even 10 years won't be any better than if you had just rented outright. But if you're planning on living in a home for 30-plus years, then you could potentially get some benefit from buying rather than renting.

Original article by By Daniel Indiviglio, The Atlantic

An old farm will once again be the site of local produce soon, in Lexington Park, MD. This is great news for the neighborhoods and communities around South Maryland.

A new farmers market is being constructed at the 108-acre property at Forest Park Road and Route 235 just south of Patuxent River Naval Air Station and it should be open by the Fourth of July.

County government bought the land in September 2006 with the aim of preserving the land and to start a farmers market, five lots were also donated to Patuxent Habitat for Humanity.

The farmers market project is a collaboration between county government and the Home Grown Farm Market, a group of seven local farmers. However, no farmers have signed up yet to actually sell produce at the market; the group is awaiting its opening.

The market will be housed in a 50-by-100-foot barn, and the goal is to eventually keep it open all year instead of just the growing season.

The market will have electricity, but not running water. The project used $428,000 of cigarette lawsuit settlement money, and most of the dollars went to site plan work.

It will be a producer market, meaning that whatever is sold there has to be grown on the seller's own farm. All farmers in Southern Maryland are invited to sell there. There will be room for between 10 and 15 sellers within the barn.

The location of the market is ideal for the workers at Pax River who use Gate 3, which exits onto Forest Park Road.
The market is "an incubator for farmers," and "it's going to take some time to grow and build."

Original article by By Jason Babcock of SoMdnews.com