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Think Home 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

If you think home prices have skyrocketed, look at rents.  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. Owning a home is much better than renting as you will build significant equity over the years. Want help finding your home to purchase?  Give me a call!  You'll be glad you did!

The Top Reason 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.

Rent Vs. Own [INFOGRAPHIC]

Rent Vs. Own [INFOGRAPHIC] | Simplifying The Market Rent Vs. Own [INFOGRAPHIC] | Simplifying The Market

Some Highlights: Rent Vs. Own

  • 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!
 

Buying a Home is Cheaper than Renting in 38 States! [INFOGRAPHIC]

Buying cheaper than renting
Buying a Home is Cheaper than Renting in 38 States! [INFOGRAPHIC] | Simplifying The Market Buying a Home is Cheaper than Renting in 38 States! [INFOGRAPHIC] | Simplifying The Market

Some Highlights:

  • According to a study by GOBankingRates, it is cheaper to buy a home than rent in 38 states across the country.
  • In six states the difference between buying vs renting would account for less than a $50 monthly difference, leaving the choice up to the individual family.
  • Nationwide, it is now 26.3% cheaper to buy.

Buying a Home Is Cheaper Than Renting

Buying a Home
Buying a Home Is Cheaper Than Renting in the Majority of the US | Simplifying The Market The results of the 2018 Rental Affordability Report from ATTOM show that buying a median-priced home is cheaper than renting a three-bedroom property in 54% of U.S. counties analyzed for the report. The updated numbers show that renting a three-bedroom property in the United States requires an average of 38.8% of income. The least affordable market for renting was Marin County, CA, just over the Golden Gate Bridge from San Francisco, where renters spend a staggering 79.5% of average wages on rent, while the most affordable market was Madison County, AL where 22.3% of average wages went to rent.

Other interesting findings in the report include:

  • Average rent rose faster than income in 60% of counties
  • Average rent rose faster than median home prices in 41% of counties
  • While median home prices rose faster than average rents in 58% of counties

Bottom Line

Buying a home makes sense socially and financially and is cheaper than renting in most of Nassau and Suffolk Counties. If you are one of the many renters who would like to evaluate your ability to buy this year, let’s get together to find your dream home.

Renting vs. Buying a Home [INFOGRAPHIC]

The Cost of Renting vs. Buying a Home [INFOGRAPHIC] | Simplifying The Market The Cost of Renting vs. Buying a Home [INFOGRAPHIC] | Simplifying The Market

Some Highlights:

  • Historically, the choice between renting or buying a home has been a tough decision.
  • Looking at the percentage of income needed to rent a median-priced home today (29.2%) vs. the percentage needed to buy a median-priced home (15.8%), the choice becomes obvious.
  • Every market is different. Before you renew your lease again, find out if you can put your housing costs to work by buying this year!