Is It Smarter to Rent or Buy?
Should you rent or buy your next home? It used to be a no-brainer but in today's market, not so much. Low prices make buying very enticing however, the concern that prices are continuing to fall keeps buyers guessing about what the price will be after they purchase. However, there are some market signals that may help you decide.
Rents Are Increasing
Rental rates in many areas are rising – in fact, the foreclosure crisis has created additional demand on rental housing inventory in several ways. First, former homeowners who lost homes to foreclosure now have to rent. In addition, buyers in areas of foreclosures hesitate to buy and decide to remain as renters instead. Not only that, but demographics alone indicate the number of renters will continue - between the baby boomers and the fact that a large percentage of people over the age of 65 rent, and an increasing number of immigrants, of whom 65% are renters, the rental market is growing fast. Moreover, stringent lending guidelines have stopped even interested home buyers. The result of all of this is a high demand for rental homes which creates a rise in rents. This is just another sign to buy now with rising rents occurring along with home prices low and falling.
Mortgage Rates Are Increasing
Prices have been low for the last several years. So have interest rates. This powerful combination has allowed record highs for affordability for over 4 years now. While prices don't appear to be going up drastically anytime in the near future, interest rates are unpredictable. The consensus is that they may be at their very best right now and are expected to go nowhere but up and possibly be steadfast in doing so. Rising mortgage rates are definitely a signal to buy now.
If Your Income And Career Are Stable For The Foreseeable Future
If you are fortunate enough to have these circumstances and are planning to stay in one place for a while (typically about 5 - 10 years), buying a home in these market conditions may be perfect for you. This time frame should allow for some evening out of the foreclosure prevalent market that we're in. Lenders will want to see ample income and a good job history for buying a home. If you're in a place where you will be in your current job for a while and you don't plan to move, you're a prime candidate to buy a home!
You Know The Home You'll Need Years Ahead
Best practice is to plan ahead and buy a home that will meet your needs 5 - 10 years from now, not just the home you would need today. Plan for a home based on your future plans. Do you plan to have children for example and will need more space? Or are you going to be an empty nester in a few years or going into retirement? In this case, you may not want a home with more than one floor.
Try to have a vision and plan for your future. Buying a home is a big deal and you'll want one that can carry you through the next 5 - 10 or even 10 - 20 years. And it's not a decision to be taken lightly so once you have your ducks in a row and you know where you're headed and how you're going to get there, contact a good realtor and a mortgage professional to help you buy the home of your dreams!
Michelle Trimmell, RA, MBA