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.
Article Courtesy of KCM Blog
MacIntyre
& Cowen, RE/MAX Real Estate Professionals Grand River, would gladly provide
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