A recent report by Zillow compared the affordability of mortgage payments versus rental payments. It found that homes on the current market were 30% less expensive relative to income than homes sold during the market peak before the year of 2000. However, homes on the rental market are now 20% more expensive than they were during that same period.
This upward trend in cost for the rental market is expected to continue in 2015 for a few reasons. The demand for rentals is increasing as people turn to the rental market due to prior foreclosures or short sales. Additionally, young professionals are moving away from home to seek new career opportunities as the economy improves, and younger people are more likely to rent initially rather than buy when they move to an area.
In 2015 we expect to see more inventory available in the real estate sales market as well, which should keep prices competitive. Home mortgage loans are also expected to hover around 4%, making mortgage payments more affordable. If these trends hold and rental rates continue to climb, renting will require higher percentages of income in comparison to a mortgage payment, making home buying potentially more attractive.
Of course there are many other factors that go into the renting vs. buying decision, including how long you plan to stay in the area, lifestyle and the cost of taxes, insurance and maintenance. This calculator from the New York Times is a helpful tool to begin the comparison and check out our residential listings to get an idea of the homes that are available in the market that may be right for you and your budget.
If you’re a first time home buyer, you’re bound to have no shortage of questions. Luckily for you, we’re here to answer all of those and provide some helpful tips for first-time homebuyers.
For more information about the benefits of buying over renting check out this blog: First-Time Home Buyers Save a Ton! Buying vs Renting.