April 12, 2011
Homeownership has long been associated with investment savvy.
Tax breaks, equity growth and the sanctity of the American dream — the real estate community has made a pretty compelling case over the years for the merits of purchasing property versus throwing your money away on rent.
But as the housing market redefines itself in the wake of the subprime mortgage crisis and the ensuing industry recession, a number of economists who follow the industry suggest the benefit of buying no longer applies. Others say it never did.
"To even claim that deduction you have to give up the standard deduction and it's not worth it dollar for dollar unless you are already itemizing [to claim charitable deductions or write off large medical expenses, for example]," says Russell James, an associate professor at Texas Tech University, who co-authored a study comparing buy versus rent scenarios. "By and large, most people with lower incomes are not itemizing, and even when they do take the deduction it's worth less to them because they're in a lower income tax rate."