MEDIAN RENT PRICE CHART dating back to 1988
This chart shows that rents should continue to go up. To limit your housing costs, assuming you don't live where there is rent control, you need to own your home. Otherwise, you will be at the mercy of rising market rents and greed of your landlord. This is not to disparage your landlord. His motivation for buying rental property is to maximize his return on investment and create a better life for his family. If you were a landlord, you would want your investment property to generate as much income as others in the area, too.
WHEN DOES RENTING MAKE SENSE
Renting is a very good choice if you don't currently have enough money for your down payment and closing costs to purchase a home. It is going to take good money management to pay off student loans and other debt and a disciplined savings program to accrue the money you will need to buy your home.
Renting vs buying also makes sense if you know you will be moving in 2 - 3 years. In our real estate market buying an average priced home, buyer closing costs are typically 3.5% of the sales price and an additional 7.5% of the sales price for seller closing costs when selling. If you are in a strong real estate market, these costs could be covered by normal real estate market appreciation from owning your home 2-3 years. If you are on your company's "fast track" for a promotion that often requires relocation, your company may offer relocation assistance including buying your home and/or paying all or part of your moving in and out expenses. Make sure you understand the moving assistance you can expect to receive before deciding whether your best option is to buy or rent.
Lastly, you may prefer not to have the responsibility of maintaining your own home. If a problem pops up, you would prefer the convenience of calling the property management company/landlord to correct the problem at THEIR EXPENSE. That's understandable. Just remember, convenience comes at a price - higher living costs as rents increase based upon market demand and/or the inconvenience of having to move when the landlord decides to sell.
Three things to consider:
- Mortgage rates have been kept artificially low during our recent economic recession and recovery. But mortgage rates won't stay where they are. Historically interest rates have been much higher than they are now. They will go up. It is just a question of when.
- Home appreciation was undermined by the recent 10-year housing market recession and recovery. As wages rise, expect housing appreciation to rise, too.
- The minimum home loan down payment is NOT 20%. For qualified buyers the minimum down payment for FHA is 3.5%, Conventional is 5%, VA is 0%. In some cases, buyer closing costs can be financed in the form of a seller concession or a lender rebate. A lender, after evaluating your income, debt and payment history, can determine what loan program is best suited for you, the most competitive loan source and the interest rate you can get. (Only buyers who put down 20% or more are not required to pay mortgage insurance that protects the lender from buyer loan default.)
Do you want to have control of your living expenses and build wealth through housing equity? Call me today for a no-obligation evaluation of your current situation of how much home you can afford and a list of available homes in your price range.
Arizona Associate Broker, CRS, GRI, e-PRO, SFR
Berkshire Hathaway HomeServices Arizona Properties