Buy for Less Than Renting in 78% of US Cities

On May 2, 2011, in Uncategorized, by David Monsour

Home prices have continued to fall for the past few years while rental rates have remained the same and even increased.  Because of this many cities have seen home prices fall enough to make purchasing housing more affordable than renting.  In fact it has been reported that this is true in over 75% of major cities.  If it’s true in major cities odds are that most small towns and rural areas are realizing the same phenomenons.

In so many words I am trying to tell you to consider buying a home.  I’m not insinuating that you go out and haphazardly buy the first home you come across but it would be an intelligent long term move to evaluate your current finances and 5-7 year plan to see where you think you’ll end up.  If you’re thinking that you’ll be moving in less than 3 years I’d probably suggest that you continue to rent.  I suggest this for a couple reasons;  it’s probably not long enough to recoup your upfront expenses, home values could fall more before they begin to appreciate again, and selling a home can take time.  It just doesn’t make sense unless you have some sort of relocation package available to you.

Why now?  RATES RATES RATES.  A one percent increase in rate will quickly diminish a persons buying power.  Rates are still very competitive and hover near the all time lows we saw a few months ago.  We are walking a fine line of prices vs. interest rates.  I personally believe that rates will adjust quicker than home prices will fall thus making rates more important than price to a persons buying power.  It is a fact that for each 1% above 4% that rates go that home prices have to fall 10% to keep the mortgage payment the same.  Keep that in mind when considering your purchase.

It’s also very important, in this market, to consider how long you plan to stay in the property.  We all have our conjectures about how it will all go down but a good personal plan is an fantastic starting point.  Homes aren’t to be considered investments for financial purposes but most people will consider the equity build up and potential appreciate of the asset in their financial plan.  It can be a great asset or a burden if proper planning isn’t done ahead of time.

If you want to discuss your personal plan for home ownership please don’t hesitate to call for a consultation.  717-319-3408 – Ask for Dave.


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