First time home buyers are taking the lead in a resurgent real estate market. Depressed housing prices in many parts of Canada and historically low mortgage rates have enticed many into taking the plunge, especially women. But is this really a good idea?

Most financial experts will tell you that buying your own house makes good sense “otherwise you are just throwing your money away”, but the situation is much more complicated than it appears on the surface and renting can be the preferred option for many Canadians.

But first let’s look at some of the compelling reasons for buying now:

1. Interest rates are at an all-time low and housing prices are down significantly from a year ago;
2. Potential for appreciation;
3. Having a mortgage becomes an enforced savings plan;
4. Pride of ownership and sense of security.

These are all good points in favor of buying, however home ownership certainly has its drawbacks, including:

1. Ownership limits your flexibility, especially in a slow market. What happens if you lose your job or your hours are cut? What happens if an opportunity beckons in some other part of the country, but you can’t unload your house?
2. Unexpected costs can be devastating. Even condos can be a problem if a major expense occurs. Vancouver condo owners were caught off guard because of the “leaky condo syndrome” when they were asked to cough up serious money for communal repairs;
3. Routine expenses such as ongoing repair and maintenance costs, property taxes and the various costs of buying and selling can also add up;
4. Home ownership can prove very time consuming and worrisome.

The deciding factor for many buyers is that they think home ownership is a good investment, but the numbers don’t always add up.  You might be surprised to hear that real estate in Canada has only averaged a return of about 5% a year since 1950.  Compare that to the Canadian stock market at closer to a 10% rate of return, even when considering the recent downturn.  In most Canadian centres today, rent is actually cheap compared to what you’d have to pay monthly for the same condo or house if you bought and financed it.

The simple truth is that home ownership is not for everyone. Resist the temptation to jump into the market simply because everyone is telling you that you are throwing your money away by renting. Do the numbers for yourself – hopefully with a simple financial plan in hand or a trusted advisor by your side to help you determine what financial strategies works best for you and your family. Then ask yourself and your partner a few simple test questions: Are you planning to be in your home for at least 7 years?  Is your job secure or is there a chance you might have to move – or simply want to?  How committed are you to any one neighbourhood, community or region?  Do you feel trapped when you think of buying or do you value the sense of security that comes with home ownership?

I’m not saying that home ownership is a bad thing (I love my new home on Salt Spring Island!), but make sure that if you take the plunge into real estate that it’s in your best interest, not because you feel pressured into it by friends, family or the all “American” Dream. – Karin Mizgala

Karin Mizgala is a Vancouver-based fee-for-service financial planner with an MBA and a degree in psychology. She’s the President of LifeDesign Financial and co-founder of the Women’s Financial Learning Centre.