This week, we are going to look at the three financial reasons to buy a home now instead of waiting: prices are rising at an accelerated rate, interest rates are increasing and rents are skyrocketing. – The KCM Crew
Part III – Rents Are Skyrocketing
Whether you own or rent, you will have a monthly housing expense. The question is how that expense will change in the future. When you purchase a home, for the most part, you lock-in that monthly housing expense for the length of the mortgage you take (15 or 30 years for example). When you rent a home, your housing expense is impacted by movements in the supply and demand for rental properties.
Historically, residential rental rates increase by 3.2% on an annual basis. However, in the current housing environment, there is an increasing demand for residential rental properties. This increase in demand has dramatically impacted rates. Zillow, in their most recent report, revealed that rental rates in the U.S. increased by 4.5% over the last twelve months. Other studies have projected rental rate increases of 4-5% over the next few years.
The only way to have control of your housing expense is to buy.
But Isn’t Buying Much More Expensive Than Renting?
Not right now! As a matter of fact, with prices down and mortgage rates at historic lows, it is LESS EXPENSIVE to buy than rent in most areas. In a recent report, Trulia revealed it is cheaper to buy than rent in ALL of America’s largest regions.
According to Jed Kolko, Trulia’s Chief Economist:
“People who didn’t buy a home last year may have missed the bottom of the market, but they haven’t completely missed the boat. Buying remains cheaper than renting in all 100 large metros. Even buyers who can’t get today’s lowest mortgage rates will still find that buying makes more financial sense than renting in nearly all local markets.”
However, Kolko went on to say that this opportunity may soon disappear:
“Although buying a home is still cheaper than renting, the gap is closing. In 2013, home prices should rise faster than rents, and mortgage rates are likely to rise in the next year as the economy improves. By next year, buying could be more expensive than renting in some housing markets, even for people with the best credit.”
Again, the only way to lock-in your monthly housing expense is to take that decision out of the hands of a landlord by owning. With both prices and interest rates set to increase, the best time to buy is right now.