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Where Are Rents Headed?

People are delaying the decision to buy a home because they are not sure where prices are headed. If they buy and prices continue to soften, they feel that they will not have purchased at the optimal moment. They reason that, if they sit and wait, they can’t be hurt. This thinking assumes that a non-decision comes without consequence.

The normal retort to this thinking by people bullish on real estate is that prices may soon turn to the positive or that interest rates will start heading upward. Buy now before the cost of buying increases! Today, we want to look at this from a different angle. We want to alert our readers that their housing expense is about to increase if they continue to rent.

Currently, in most parts of the country, buying is less expensive than renting. Plus, purchasers can lock in their housing expense for the next thirty years by buying now. They will get a sensational price and a record low interest rate. What will happen if they continue to rent?

The Alternative to Buying

If a family continues to rent, they are looking at a housing expense which will rise with the market. Rental costs increase by 3% a year historically. But today’s rental market favors the landlord to a greater degree. Below is a graph of how rental prices have increased recently and where they are projected to go over the next few years based on a report from Marcus & Millichap.

 

Bottom Line

Hoping to save by delaying the purchase of a home may result in higher housing costs while you’re waiting, thus achieving the exact opposite result. Check with a local real estate professional to determine the best option for you and your family.


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55 replies
    • Anonymous
      Anonymous says:

      It’s actually showing a 4% annual increase over the next few years as was projected in the article (which is linked in the post). The historic annual rental increase has been approximately 3%.

      Reply
  1. Ruthmarie Hicks
    Ruthmarie Hicks says:

    Rentals are going up by double digits around here. Its actually pretty scary.  People who have lived comfortably in rentals in many of our communities are being dislocated and are finding that getting anything else approaching the price they had before means a major geographic move or major downsizing.  A national chart really doesn’t tell the whole story. High density areas are getting whacked with major rent increases. 

    Reply
  2. Heathersellsva
    Heathersellsva says:

    i’m surprised that this article does not even address the interest rates and pricing now compared to the increased interest rates that are going to start happening towards the end of this year…so even if renting while waiting for that perfect time to buy these yet to be buyers will end up paying more for their mortgage payment as well…even if that mortage is still less expensive than renting or as I like to call it paying someone else’s mortgage and getting none of the tax breaks.

    Reply
  3. Ida Bear
    Ida Bear says:

    In my ‘real’ world rents are in excess of $1200+ a month and they is not even for a decent area with decent school. LOW rent districts are more like 800+ per month and you need to hire personal security to live there. Our challenge here is the market turns over soooo quickly because its a large Military area. CLients are tempted to buy because of the high rents but its tricky to advise them because they may have to leave in 3 years…

    Reply

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  14. […] historically increase by 3.2% on an annual basis. A study issued earlier this year projects rent increases of 4% for the next two years. Trulia recently […]

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  16. […] historically increase by 3.2% on an annual basis. A study issued earlier this year projects rent increases of 4% for the next two years. Trulia recently […]

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  40. […] friends at KCM illustrate our point this way:  If a family continues to rent, they are looking at a housing […]

  41. […] today’s low rates it is actually less expensive to buy for the first time in decades! For more, check out this post which includes a graph showing the rate of rent increases. And keep in mind, potential buyers are […]

  42. […] (typeof(addthis_share) == "undefined"){ addthis_share = [];}The KCM Blog just posted this happy graph, showing average national rent increases over the past three […]

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