KEY QUESTIONS

Rent or buy?

Some financial experts equate renting with flushing money down the toilet. But in some cities, including Portland, renting may make more sense than buying— even with today’s low loan rates and sales prices that have dropped by nearly 10 percent in the past year.

A couple of reasons: (1) In Portland, equity in single-family homes is expected to fall by $88,000 between now and 2012, according to a recent study by the National Low Income Housing Coalition. (2) By renting, Portlanders can save about $700 per month in maintenance, insurance, and utility costs, which local homeowners typically have to pay. “We need to step away from looking at buying a home as a profit-making investment,” says Danilo Pelletiere, the Housing Coalition’s research director and coauthor of the study. Pelletiere offers these suggestions if you’re thinking of buying:

Track the Trends

It’s important to assess factors like unemployment and foreclosure rates, both of which are on the rise in Oregon. Such trends negatively affect home values and the ability of homeowners to build equity. One foreclosed home can reduce the value of neighboring homes by as much as 10 percent.

The Rule of Fifteen

A home’s purchase price should be no more than fifteen times the yearly rental rate of similar-size houses in the area. Because annual rental rates and home prices should fall within about 7 percent of each other, this simple test reveals whether a home’s price is inflated.

Get Personal

If, after five years (the standard amount of time it takes to build equity), the home is worth less than what you paid, will you still be happy with it? If the answer is yes, then chuck those other principles. Ultimately, Pelletiere says, the owner decides a home’s true value.—Lynette Sanchez

Who can use the new federal $8,000 tax credit?

The Obama administration’s American Recovery and Reinvestment Act is designed to make it easier for first-time home buyers to get into the market by allowing an $8,000 tax credit. The offer is generous—the credit doesn’t have to be repaid, and the definition of “first-time home buyer” extends to anyone who hasn’t owned a home in the past three years. But there’s a time limit: you have until November 30 to take advantage of the offer, which is administered through the IRS via Form 5405. A simple explanation of the tax credit is available from the National Association of Homebuilders: federalhousingtaxcredit.com.