Have you ever asked yourself whether it makes more sense to buy a home or to rent? This is one question many potential homeowners struggle with every day. The answer is not one-size-fits-all, and it's certainly not as simple as saying “renting is just like throwing money in the garbage.”
It's important to understand that market conditions vary greatly in each city and state, so understanding your local market before making any decisions is strongly recommended. Market conditions are constantly changing, so what seems like a good strategy today may not be tomorrow. Lastly, every individual has a unique financial and credit profile which must be considered.
Potential home buyers can’t be expected to have all the answers, so we’ve put together some helpful information for you to think about.
Currently, rent amounts are rising higher and higher. Rents have been steadily increasing for the past 15 years, and data indicates rental affordability will get worse before it gets better. Reports from Zillow indicate that over the past year, rent rates have risen 2.8%.
Simultaneously to rent rates increasing, we are seeing healthy improvement in home values, and home sales analysts are projecting a 5 to 6% appreciation in home values in our region over the next year.
Let’s say you purchased a home today at $300,000 with a 5% down payment. This equates to a $15,000 investment at 6% appreciation. This same property would be worth $318,000 in one year, turning your $15,000 investment into an $18,000 return — in just one year! Are you seeing that kind of return on other investments you're currently contributing to?
Speaking of interest, we've been spoiled with amazingly low interest rates for the past few years. Interest rates have been on the decline for over 15 years, and with the economy continuously improving, all data indicates that interest rates will be higher next year. With home values improving, this means only one thing: buying a home next year will be more expensive. Those of you planning on renting for another year to save more for a down payment could be making a big mistake.
With rent rates rising, there are a few questions to consider. Is it really going to be as easy to save more with higher rental expenses? And, will this be enough to compensate for the increased costs of buying a home next year? If you're interested in knowing what your potential monthly mortgage payment could be, check out our helpful payment calculator.
There are some very important technical market factors to consider before deciding whether to buy or rent; conservative credit and down payment requirements are also significant things to consider.
Before making your decision, call Homeland Lending at any time for complimentary advice. We can also provide you with a simple, easy to understand printed analysis that takes these factors into consideration.
Remember, there are no right or wrong answers. As your mortgage professionals, we’re committed to providing you with all the information and resources you need to make the very best decision for you and your family.