Should You Rent or
Should You Buy Now…
With Home prices on
the rise due to low interest rates and not enough inventory to meet demand,
does it make sense to continue renting and wait out the Seller’s Market? Or is
now really the best time to buy?
Sometimes, with real
estate, it feels like by the time you hear the rumblings that “NOW” is the time
to buy, you’ve missed the window of opportunity. I mean, isn’t everyone already
running in and snatching up the hot deals and driving prices up on the remaining
homes? And if prices are being driven up wouldn’t it make sense to stay in your
rental until things slow down again? Assuming they will slow down? How can you
tell if the time to buy really is NOW?
Well, first let’s
look at the numbers. According to Pulsenomics, as published by Keeping Current
Matters, historically you needed to spend 25% of your income to afford the
Median rent. However, in the current market Median rent is now 30.1% of your
income while the percent of your income to afford to purchase the Median home has
dropped from 22% to 15.3%. As you can see both historically and in today’s
market the cost to own a home is lower than that to rent.
Here are some of the
financial reasons why:
- Mortgage Rates are Low. Historically rates are at the lowest they’ve been in some time and are only predicted to increase by about 1% by this time next year. This stability in lending rates will help keep the real estate market strong.
- Equity. When you own your home a percent of what you pay towards your mortgage actually goes into your pocket in the form of equity. When you rent, that money goes into your landlord's pockets. And if the market continues to improve causing your home’s value to increase you’ll build equity at an even faster rate. The general rule is that if you stay in your home for 5-7 years the costs of purchasing your home are more likely to be offset by accrued equity and increased housing value.
- Tax Deductions. All that interest you are paying, guess what, its deductible! This lowers your taxable income and puts more money into your pocket. Oh and property taxes, too. Yep, all deductible!
And here are some
non-financial reasons to buy a home:
- Creative Control: Want more say in the aesthetics of your home? Tired of having to answer to someone else when it comes to how many pictures you hang, or new window treatments? As a homeowner you won’t have to answer to anyone else when you want to make small or large changes to your home.
- Maintenance Choices: Do it yourself, or hire a contractor of your own choosing. There’s an autonomy to home ownership that you don’t have as a tenant.
- Your Life, Your way. Speaking of autonomy…. Have you always wanted a dog? Or two? How about a summer vegetable garden? Or kitchen remodel? The choices are yours alone.
- And lastly, Credit. Yes your credit should already be decent when you begin the home buying process, but as lenders report to credit agencies (and landlords usually don’t) another benefit of home ownership is your credit worthiness continues to increase. And this will be important when you’re ready to cash in that equity and buy your next dream home.
So yes, the market
is hot and home values are increasing and houses are selling quickly, but you
have not missed the boat. There are still many great opportunities in the
market and I’d love to help you find the perfect one for you.
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