In the latest Rent vs. Buy Report from Trulia, they explained that homeownership remains cheaper than renting with a traditional 30-year fixed rate mortgage throughout the 100 largest metro areas in the United States.
The updated numbers actually show that the range is from an average of 16% in Honolulu (HI), all the way to 55% in Sarasota (FL), and 35% Nationwide!
The other interesting findings in the report include:
- Interest rates have remained low and even though home prices have appreciated around the country (3.9%), they haven’t greatly outpaced rental appreciation (3.7%). “In the past year, these two trends have made homeownership even more affordable compared with renting.”
- Some markets might tip in favor of renting if home prices increase at a greater rate than rents and if – as most economists expect – mortgage rates rise, due to the strengthening economy.
- Nationally, rates would have to rise to 10.6% for renting to be cheaper than buying – and rates haven’t been that high since 1989.
Buying a home makes sense socially and financially. Rents are predicted to increase substantially in the next year, so lock in your housing cost with a mortgage payment now.
John Kynor, Q Realty, Inc. says:
“We find that many of our clients who contact us about renting don’t realize how affordable it is to buy. They inquire about renting because they think it is their only option, though there are many factors that make home-ownership more affordable than renting.
Not only is it often less expensive on a monthly basis because interest rates are incredibly low right now, but a portion of each mortgage payment actually contributes to paying down the mortgage and in time, the owner, who otherwise might have been a renter, will accrue some equity in the home, which means they might get some money back when they sell. Additionally, the interest portion of the monthly payment, the part that is not paying down the mortgage, is tax deductible and can often allow the homeowner to save money on their income taxes.
If the financial reasons aren’t convincing enough, there are many other reasons why home-ownership is more attractive then renting. As a home-owner, you can paint, remodel, landscape the home exactly how you want without needing approval from a landlord (HOA approval is sometimes necessary for exterior work).”
Christopher Juarez, First Mortgage Company says:
Buying a home is one of the biggest purchases you will make in your life time. If done correctly, your home purchase can also be one of the smartest investment opportunities as well. Home rent will obviously be dictated by the housing market in that area, which is why you will see certain areas yield different figures in rents received. Given the current state of our housing market, interest rates have continued (and will most likely continue to do so) to stay low which only makes more sense to purchase a home as opposed to renting.
There are a number of mortgage programs that will specifically cater to all kinds of home buyers, be it first time home buyers, investors or move up home buyers. There are a number of programs that will even allow for a very minimal down payment (As low as $500) of course there are income/credit restrictions for these programs however the point is there are potential mortgage products even for lower/moderate income buyers. If we consider the rent vs. buy logically, it clearly makes more sense to purchase a home & start building equity in something you own as opposed to giving your money away with no potential for any type of return. If you are renting for just $700 a month over the course of 10 years you will have spent roughly $105,655 (assuming a 5% annual inflation rate).
Imagine if you held that equity position in your home. This number alone should probably drive you renters to schedule an appointment with your local Loan Officer & Real Estate Professional. As a Mortgage Professional, the biggest deterrent for first time buyers is a lack of education on mortgage options and/or a lower credit score that will not allow hopeful buyers to purchase a home at that time.
My best advice before starting the home buying process is to consult a Mortgage Professional, evaluate your credit, save money & look for ways to build a better overall credit portfolio. Fortunately & unfortunately the only way to build credit is to establish debt & prove a consistent history of paying off that debt. As trivial as it may seem, everyone has to start somewhere. Start building your credit & saving money to buy a home, it will literally save you hundreds of thousands of dollars.