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2017-09-26 15:34:04
Should I continue to Rent or Buy?

Rent vs. Own

As real estate professionals we are continually asked by many home buyers, why should I buy when my rent is cheap right now? 

Here are a few things you might want to ask yourself. 
How long will rent stay affordable? and what are the actual benefits of owning a home?  
Even if you decide on a home with a higher mortgage payment there are benefits to home ownership! 

  • Mortgage payments can be fixed for the entire term of the loan.
  • Potential equity (for you, not your landlord)
  • Possible Refinancing options (To lower payments or take out equity) 
  • Possible Tax deductions
  • You have control on what you change in your home. (Paint, Carpet, other remodels)
  • Have children? Studies show home ownership makes children feel more secure.

Many clients who are searching for homes continue to see the effects of increasing home prices and unfortunately this eventually trickles down to rent payments. Although you may not see the effects right away it does happen over time. Here is what we are talking about.

As home prices continue to climb waiting to buy could potentially cost you thousands of dollars.  You're probably asking, What does that have to do with my rent? Well... when was the last time you saw your rent go down? It is very rare that rent payments ever go down. It just doesn't seem to ever happen. Rent payments tend to follow mortgage values with a bit of a delay (Usually within 1-2 years). Although a home similar to what you are renting right now might have a slightly higher mortgage payment now. It's very possible the mortgage payment you could have will end up being less than your rent payment in only a year or two, and it will usually stay the same unlike rent!

Did you know that on average historically home prices have increased around 7% per year? Assuming a 7% per year increase in price means that a home's value doubles almost every 10 years on average. So that $200,000 home you were looking at a year or two ago could already be valued somewhere between $207,000 and $215,000 and could potentially increase to as much as $400,000 in the next 10 years or so. Sounds crazy right? Go ask your parents or better yet grandparents what they bought their first home at & look at what it is worth now. My grandparents bought their first home for somewhere around $7,000 back in the mid 50's I bought my first home for just over $74,000 in the mid 90's. These were both great starter homes at the time and looking at them and the current values of the type of homes they are they have both come very close to following those numbers even with the huge market correction we had back in the mid/late 2000's. Which we will talk about in a bit. 

While there are no calculations can ever predict what the market will actually do or what an individual home will sell for this is a fun way of seeing how homes have increased in price over time.

Calculation used for chart example below
(Then Price x 2 = ______ x.90 (or 90%)= ________) Do this for each 10 years

If you bought
in the:

Low 

High

50's -
60's -
70's -
80's -
90's -
00's -
Now it's probably worth between->>

In 10 more years -

$6,250
$11,250
$20,250
$36.450
$65,610
$118,098

$212,576

??

$10,000
$18,000
$32,400
$58,320
$104,976
$188,957

$340,123

??

So let's talk about that market correction that happened in the mid/late 2000's for a minute, what actually happened? Why did the housing market crash so bad? Well much of the markets issues came from poor lending practices and buyers who just couldn't pay. Many lenders would lend to just about anyone who could breath with little actual borrower qualification causing foreclosures & shortsales everywhere! So much to the point the government had to step in & step in BIG! Just about everyone is familiar with the $700 billion government bank bailout of 2008. Although needed, it drove home prices to nearly nothing. Home buyers & investors were buying foreclosed homes & short sales for a fraction of what they were valued at only a couple years before. Why? Banks now had money to give these bank owned homes away so they would negotiate with just about anyone and take almost any deal to just get them off their books. This drove home prices down due to the ability of the average person to get one of these foreclosed on homes for cheap!
Lending has definitely have changed since then. With tighter lending guidelines, and stricter buyer verifications our housing economy again continues to grow.  

Back to the question we started with. Should you buy or continue to rent?

That really is a personal question for you and your situation.
Home ownership has been said to be the American Dream and when you decide to do it there's nothing really like owning your very own place.
It is an investment anyone can do if they really want to. You can build equity & receive potential tax benefits. After you have been there for a while rent it for an additional income source or sell it & move the equity to your next bigger, better home. You can take any equity out later to pay for school, a new car, or use it for retirement!
The choices are endless but the choice is yours!

Where you choose to go next is up to you...

 

Search available home listings

Look into a mortgage loan pre qualification

Market Value of your existing home

** Charts and calculations on this page are for or informational use only and are in NO WAY a guarantee of any home values or any kind of market value predictions. Many factors go into property values and individual results will vary.  

 
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