Rent vs. Buy

Think Prices Have Skyrocketed? Look at Rents.

Think Prices Have Skyrocketed? Look at Rents. | Simplifying The Market

Much has been written about how residential real estate values have increased since the housing market started its recovery in 2012. However, little has been shared about what has taken place with residential rental prices. Let’s shed a little light on this subject.

In the most recent Apartment Rent Report, RentCafe explains how rents have continued to increase over the last twelve months because of a large demand and a limited supply.

 “Continued interest in rental apartments and slowing construction keeps the national average rent on a strong upward trend.”

Zillow, in its latest Rent Index, agreed that rents are continuing on an “upward trend” across most of the country, and that the trend is accelerating:

“The median U.S. rent grew 2% year-over-year, to $1,595 per month. National rent growth is faster than a year ago, and while 46 of the 50 largest markets are showing deceleration in annual home value growth, annual rent growth is accelerating in 41 of the largest 50 markets.”

The Zillow report went on to detail rent increases since the beginning of the housing market recovery in 2012. Here is a graph showing the increases:Think Prices Have Skyrocketed? Look at Rents. | Simplifying The Market

Bottom Line

It is true that home prices have risen over the past seven years, increasing the cost of owning a home. However, the cost of renting a home has also increased over that same time period.

What Is the Cost of Waiting Until Next Year to Buy? [INFOGRAPHIC]

What Is the Cost of Waiting Until Next Year to Buy? [INFOGRAPHIC] | Simplifying The Market

What Is the Cost of Waiting Until Next Year to Buy? [INFOGRAPHIC] | Simplifying The Market

Some Highlights:

  • The “cost of waiting to buy” is defined as the additional funds necessary to buy a home if prices and interest rates were to increase over a period of time.
  • Freddie Mac forecasts interest rates will rise to 3.8% by Q4 2020.
  • CoreLogic predicts home prices will appreciate by 5.4% over the next 12 months.
  • If you’re ready and willing to buy your dream home, now is a great time to buy.

 

Homeowners Are Happy! Renters? Not So Much.

Homeowners Are Happy! Renters? Not So Much. | Simplifying The Market

When people talk about homeownership and the American Dream, much of the conversation revolves around the financial benefits of owning a home. However, two recent studies show that the non-financial benefits might be even more valuable.

In a recent survey, Bank of America asked homeowners: “Does owning a home make you happier than renting?” 93% of the respondents answered yes, while only 7% said no. The survey also revealed:

  • More than 80% said they wouldn’t go back to renting
  • 88% agreed that buying a home is the “best decision they have ever made
  • 79% believed owning a home has changed them for the better

Those surveyed talked about the “emotional equity” that is built through homeownership. The study says more than half of current homeowners define a home as a place to make memories, compared to 42% who view a home as a financial investment. Besides building wealth, the survey also showed that homeownership enhances quality of life:

  • 67% of current homeowners believed their relationships with family and loved ones have changed for the better since they bought a home
  • 78% are satisfied with the quality of their social life
  • 82% of homeowners said they were satisfied with the amount of time they spend on their hobbies and passions since purchasing a home
  • 75% of homeowners pursued new hobbies after buying a home

Homeowners seem to be very happy.

Renters Tell a Different Story…

According to the latest Zillow Housing Aspirations Report45% of renters regret renting rather than buying — more than five times the share of homeowners (8%) who regret buying instead of renting. Here are the four major reasons people regret renting, according to the report:

  • 52% regret not being able to build equity
  • 52% regret not being able to customize or improve their rentals
  • 50% regret that the rent is so high
  • 49% regret that they lack private outdoor space

These two studies prove that renting is just not the same as owning.

Bottom Line

There are both financial and non-financial benefits to homeownership. As good as the “financial equity” is, it doesn’t compare to the “emotional equity” gained through owning your own home.

One of the Top Reasons to Own a Home

One of the Top Reasons to Own a Home | Simplifying The Market

One of the benefits of homeownership is that it is a “forced savings plan.” Here’s how it works: You make a mortgage payment each month. Part of that payment is applied to the principal balance of your mortgage. Each month you owe less on the home. The difference between the value of the home and what you owe is called equity.

If your home has appreciated since the time you purchased it, that increase in value also raises your equity. Over time, the equity in your home could be substantial. Recently, CoreLogic revealed that the average homeowner gained more than $65,000 in equity over the last 5 years.

Unlike last decade, homeowners are no longer foolishly tapping into that equity. In 2006-2008, many owners used their homes like an ATM by pulling equity out to purchase new cars, jet skis, or lavish vacations. They were pulling out cash (equity) from an appreciating asset, and then spending it on rapidly depreciating items. That is not happening anymore.

Over 50% of Homes Have at Least 50% Equity

The number of homeowners that currently have at least 50% equity in their home is astonishing. According to the Urban Institute, 37.1% of all homes in the country are mortgage-free. In a home equity study, ATTOM Data Solutions revealed that of the 62.9% of homes with a mortgage, 25.6% have at least 50% equity. That number has been increasing over the last five years:One of the Top Reasons to Own a Home | Simplifying The MarketBy doing a little math, we can see that 53.2% of all homes in this country have at least 50% equity right now. Of all homes, 37.1% are mortgage-free and an additional 16.1% with a mortgage have at least 50% equity.

Bottom Line

Homeownership is different than renting. When you own, your housing expense (the mortgage payment) comes back to you in the form of equity in your home. That doesn’t happen with your rent payment. Your rent helps build your landlord’s equity instead.

A Great Way to Increase Your Family’s Net Worth

A Great Way to Increase Your Family’s Net Worth | Simplifying The Market

Every three years, the Federal Reserve conducts its Survey of Consumer Finances. Data is collected across all economic and social groups. The latest survey data covers 2013-2016.

The study revealed that the median net worth of a homeowner is $231,400 – a 15% increase since 2013. At the same time, the median net worth of renters decreased by 5% ($5,200 today compared to $5,500 in 2013).

These numbers reveal that the net worth of a homeowner is over 44 times greater than that of a renter.

Owning a home is a great way to build family wealth.

As we’ve said before, simply put, homeownership is a form of ‘forced savings.’ Every time you pay your mortgage, you are contributing to your net worth by increasing the equity in your home.

That is why Gallup reported Americans picked real estate as the best long-term investment for the sixth year in a row. According to this year’s results, 35% of Americans chose real estate. Stocks followed at 27%, then savings accounts and gold.

Bottom Line

If you want to find out how you can use your monthly housing cost to increase your family’s wealth, let’s get together to help you through the process.

Rent Vs. Own [INFOGRAPHIC]

Rent Vs. Own [INFOGRAPHIC] | Simplifying The Market

Rent Vs. Own [INFOGRAPHIC] | Simplifying The Market

Some Highlights:

  • Owning your own home vs. renting may lead to some great options, such as locking in your monthly payments and having the freedom to customize your living space.
  • Whether you rent or own, you have to cover someone’s mortgage costs. You may as well be doing so to build your own wealth, rather than that of your landlord.
  • Renting and owning both have up-front fees when you sign your lease or close, respectively. Think about putting that money to work for you!

 

Susan Rupert Group

Realtor, ABR, CRS, SRES, MCNE, e-PRO
Kissinger Bigatel & Brower

2300 South Atherton Street
State College, PA 16801
Mobile/Direct: 814-280-0364
Office: 814-234-4000 ext. 3213
Email: Susan@StateCollegePARealEstate.com

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