When the U.S. housing market crashed in 2006 it was considerably cheaper to rent a house than buy it. Today, the reverse is true in a lot of states, particularly seven of them which were impacted the most when the housing bubble burst. These include Arizona, California, Florida, Nevada, Illinois, New York and New Jersey.
So what does this mean? Is the pendulum swinging back to where buying a house is now a cheaper option than renting it? Does this also mean that many Americans who had deleted home ownership from their "American Dream list" can now put it back on the list? Let's take a closer look and try to answer these questions.
Let's start by highlighting some facts. Home prices are dropping, interest rates are at their lowest levels and the cost of renting is rising. Rental costs have steeply increased in many metro regions of various states, especially the group of seven hardest hit states mentioned above. In many communities where home values have dropped by 30% or more, renters with good credit find it more beneficial financially to own the home they currently rent, for which they are shelling out a lot of dough each month.
A recent study by Deutsche Bank further solidifies the case for buying instead of renting. On an average, Americans are now paying 9.8% of their incomes to own their homes after paying mortgage, property taxes and insurance payments. This, according to the study is down from 17.2% at the peak of the housing bubble. The study also highlights the fact that in 28 of the nation's 54 major housing markets, paying mortgage on a house, along with most other costs of owning it is now cheaper than renting the same house.
So if you are currently renting a house or an apartment and if your credit is really good, now may be your best opportunity to consider home ownership.
It may be a good idea for you to talk to a Realtor from Ackley Florida Property Management or Coldwell Banker Ackley Realty to determine how much you would be paying to buy a home that's comparable to the one you are renting at present. You can also visit a few open houses that are within your price range in areas you would like to live. A Coldwell Banker Ackley Realty Realtor can give you the approximate monthly payments you can expect to make, including mortgage, real estate taxes, utilities and homeowner's insurance.
The next step is to figure out the total monthly renting costs you are incurring. This includes the monthly rent plus maintenance fees, renter's insurance, and any mandatory charges. You can use this as a basic benchmark to help your decision making process.
You can also talk to your local credit union, bank or a mortgage lender to find out interest rates, application fees, loan origination fees, closing costs, and other costs that you may be paying to acquire a mortgage.
In conclusion, if you are sitting on the fence and trying to decide if this is the right time to buy, you may want to consider pulling the trigger, given the prevailing trends and patterns of increasing rental costs, deflated home values and the availability of historically low interest rates. But be sure to consider your local housing market conditions. You may be in a depressed macro market, but there may be pockets of micro markets within that region where homes may not have lost a lot of value. It is important to remember that all real estate is local and with some homework and help from a local real estate agent, you can bring your American Dream to fruition.