Renting vs Buying


The Renters Dilemma

New data shows buying a home now is more affordable than pre-housing recession.

See the 12 markets with historically high mortgage and rent affordability: http://zlw.re/6185W3iSScreen Shot 2014-09-18 at 1.37.54 PM

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What makes one location better for a rental property than another?

  • Closeness to a major employer
  • Easy access to a commercial area
  • Beautiful area
  • A neighboring college.

When it comes to rentals, being close to a college is one of the best investments. It’s not just the regular students to consider but also the graduate students, lecturers, college staff, and professors.

It’s a fact: property in well-known college towns usually sell better than its neighbors. Not only is the rental market stronger, but so is retail and hospitality, to serve the many students, staff and instructors.

And then there’s the culture that comes along with being near a college: plays, lectures, concerts, arts and all the ideas and energy surrounding a college.

Berkeley, CA
The East Bay region of the San Francisco Bay Area has definitely felt the real estate downturn, but in Berkeley, far less so though than neighboring cities. The main reason is that Berkeley is home to the University of California at Berkeley.

This chart shows you the median price-per-square foot of homes sold in Berkeley in the last two years, as compared to those sold in the East Bay as a whole.

Not only leading the pack, Berkeley has doubled the median of the region as a whole.
Next, look at sale distribution data for the entire East Bay.

Berkeley proper follows, and again, the difference is amazing:

See all available homes for sale in Berkeley, CA

So, When thinking about buying a home, whether as a primary residence or as secondary property, one meant to generate rental income, being near a large university might be the way to go.

I’ve helped many clients purchase property for their students going to UC Berkeley and am very familiar with the areas, homes, and rental values. If you’re considering purchasing a home near the University I can help you finding the area that’s right for you, your student or your best investment value. I can also point to lenders who can help you with a “second home” purchase that will be more beneficial to your bottom line.

by Phoebe Chongchua

If you’re currently renting and have dreamed of owning a home, now may be the perfect time. Trulia.com is reporting that during the month of July, buying was cheaper than renting in 74% of the country’s 50 largest cities.

However, in 12% of the cities, such as New York, Seattle, and San Francisco, you could rent a place for less than you could buy one. And in the rest of the cities (14%), it was about even, with renting being only slightly less than the cost of buying.

What’s tipping the scale to make buying cheaper than renting? Of course, it’s the declining home prices and historically low-interest rates are also helping to encourage home buying. Recently, interest rates for 30-year and 15-year fixed have been hovering near 4%. Also, the increased demand for rental units is pushing rents up, making now a good time to buy as purchasing a home is cheaper than renting one in most major U.S. cities.

This is making purchasing a home enticing for those who are planning to stay for several years and have the ability to put down a down-payment of about 20 percent.

Where are the hot buying markets? Las Vegas tops the list. The S&P/Case-Shiller home price index, as reported by CNNMoney.com, shows that prices “have plunged more than 59% from their August 2006 peak.”

Other markets where buying beats renting include Detroit, Michigan; Mesa, Arizona; and Fresno, California. All of these are places where the cost of a median price condo/townhouse is approximately seven times annual rent.

And as reported by CNNMoney.com, Arlington, Texas; Sacramento, California; Phoenix, Arizona; and Jacksonville, Florida, “all had buy-rent ratios of eight,” according to Trulia.

New York is the highest city to rent a home (of the 50 markets surveyed). And to buy in that city would cost about 36 times as much, pushing the purchase price to about a million dollars.

If you’re renting now and wondering is this the right time, it really depends on your particular circumstances. Timing the real estate market is never a perfect science. However, the indicators are strong that if you can afford to buy, today’s market certainly offers many good opportunities.

Here are a few things to consider to help you make your decision.

The first is the length of time you’ll stay in the home. Moves are costly and purchasing a home requires extra cash for commissions and closing costs. So, if you’re not sure you can stay for a while, postponing buying might be the right choice. However, if you’ve been in your rental for a long time and have roots in your city, there are great deals on homes. It might be the right time for you to start paying your own mortgage instead of paying your landlord’s mortgage.

How much down payment? This is a critical concern. With stricter lending requirements, having cash to put down is a make-or-break factor in purchasing a home. Buyers often have to come up with 20% and that can be a big chunk (or even all) of a person’s savings. Also, note that the money usually has to be “seasoned”. In other words, the down payment money can’t just suddenly appear in your savings account only days before you decide to buy a home. Ask your real estate agent and loan officer for more details.

The cost of owning a home. Part of the thrill of owning a home is the fact that you own it. That means you’re responsible for everything inside and out. Of course, planned developments and Homeowner’s Associations may cover some of the outside maintenance but then you’ll be paying monthly fees. When considering whether to buy or rent, one of the things many first-time buyers neglect to think about is the cost of maintenance. When appliances break; you, the homeowner, will pay to fix them. No more landlord or apartment manager to the rescue. So, if you think things through and weigh the cost of rent versus the cost of buying, you may find the cost and the increased responsibility are well worth it because along with homeownership comes the pride of making your home yours exactly as you like it.

Copyright © 2011 Realty Times. All Rights Reserved.

Article courtesy of Realty Times  Stop Renting and Buy While Homes are Most Affordable.

by Phoebe Chongchua

Millions of foreclosures have turned former homeowners into renters. In fact, there’s been a nearly 34 percent increase in rentals over the last decade, according to a USA Today analysis of U.S. Census data. That means that in 2010, nearly 35 percent of occupied homes were rented.

According to USA Today, 25 cities including Baltimore, Minneapolis, Salt Lake City and Sacramento went from having more than half homeowners in 2000 to majorities of renters in 2010.

The data looked at more than 500 midsize and large cities. Significant jumps in the renter-occupied versus the owner-occupied homes occurred in Irvine, California (from about 40 percent occupied rented homes to 49.8 percent between 2000 to 2010). During that same period Philadelphia increased from 40.7 percent to 45.9 percent and Birmingham, Alabama, saw a nearly 5 percent increase to reach 50.7 percent. Baltimore, Minneapolis, Sacramento, and Salt Lake City saw major shifts from owner-occupied to renter-occupied.

If you’re becoming a landlord for the first time by choice (investment property) or because you can’t sell your home now, here are a few tips to consider.

Understand how debt affects your ability to qualify for a loan. First, if you’re just getting started and are looking to purchase a property to later rent, consider that Freddie Mac guidelines typically require a maximum debt-to-income ratio of 45 percent.

Be prepared to put more money down. Owner-occupied properties have the advantage of requiring a smaller down-payment than investor mortgages which sometimes require as much as 40 percent. Also keep in mind that when buying a property for investment purposes, the down payment and/or the closing costs cannot be from gift money.

Know your market and ability to rent your property. Overall rental growth is increasing while homeownership is declining. According to the Census data, The number of renter households has grown, on average, by nearly 700,000 a year since the housing peak in 2006 and the number of owner households is shrinking, on average, by just over 200,000 a year. This could be good news if you’re planning to rent your home. But supply and demand are key. So study your particular rental market carefully. before you buy or place your home for rent.

Rents may rise if the market doesn’t get too saturated. As more homeowners (who have the ability to) decide to hang on to their homes and list them for rent instead of for sale, they’re finding that it can be beneficial for them. While homeownership has declined for six consecutive years, the rental market is one of the few sectors to benefit. But how long that will last is uncertain. With the increasing number of foreclosures, the rental market is becoming saturated. In some areas, that’s causing rental properties to sit on the market just like other for-sale properties.

However, some other experts still say that there will be a boost in rental growth for at least the next couple of years due to foreclosures, housing prices being uncertain and causing people to wait to buy, and government homeownership subsidies being cut.

Know when to reduce rent. Experts advise that if a rental home is listed for longer than about 30 to 45 days, it might be time to reduce the rent. Also, keep in mind that rental properties are just like other for-sale properties, needing to be kept in good condition and have their upgraded amenities showcased. Use a real estate agent to help you highlight your property and get it rented quickly.

Owning a home still preferred. Regardless of the growth in renters, the idea of homeownership is still the American dream; 74 percent of renters think owning is superior to renting, according to a recent survey by mortgage giant Fannie Mae.

Copyright © 2011 Realty Times. All Rights Reserved.

by Phoebe Chongchua

A soft real estate market that is ripe with all the conditions that should entice people to purchase a home still has some renters asking, “Why own my own home?”

Low interest rates, lower home prices and an improving job market still have some buyers sitting on the fence fearful of an uncertain real estate market. Real estate agents and even sellers are finding that prospective buyers (current renters) may need a little more “emotional” attention in these market conditions. They may need a little more explanation to ensure that they understand the benefits of purchasing your home rather than renting another.

While deciding to own a home or rent one is very personal, many tend to let fear of the unknown be the driving force in making their decision and that can later create an unhappy decision

Here are five top reasons to at least consider owning your own home.

No more landlords: This may be a highly influential factor depending on a potential buyer’s experiences. Many renters have poured a ton of money into a home that they’re living in to keep it at the standard of living they enjoy, only to find that their landlord is soon planning to sell the home. Their hard-earned cash and money invested into their rented home will then only benefit the seller.

Making a home your style: This is much more difficult to do in a rental. Yes, as I just mentioned, you can make some modifications, but many things that can be done to a home you own can’t be done to one you’re renting. Taking into consideration Homeowner’s Associations or planned community development restrictions, owning still provides more control and flexibility over renting.

Weighing the costs of homeownership: Of course, with homeownership you won’t be calling the landlord to come fix your toilet or dishwasher. So, having a financial reserve is important to carry you through the months when you run into unexpected troubles. Websites such as GinnieMae.gov offer price charts that help you compare how much you’ll save by buying or renting. It’s a helpful tool that allows you to analyze factors such as how much tax savings you’re likely to receive, how much possibly equity you’ll gain, and how much your rent may increase.

Long-term plans tilt the scale toward owning: In a recent Tampa Bay article, Walter Molony of the National Association of Realtors said, “For people with long-term plans, the rent vs. buy equation is tilting heavily toward buying because housing affordability is at record highs dating back to 1970,” he explains. “Homes are undervalued in many areas—selling for less than the cost of replacement construction—and rents are rising at a faster pace. Many people are considering ownership now as a hedge against inflation.”

Low interest rates and affordable homes will not last forever: If you’re not ready to buy or simply can’t afford to own a home, even the historically low interest rates and exceedingly affordable, home prices might not move you to take the leap into homeownership. However, understanding that these conditions won’t last forever is important. Sometimes when conditions persist, we tend to think they’ll always be this way.

Distressed sales will begin falling in 2013 and that would then cause home prices to creep upward, predicts Moody’s Analytics. With little activity on the homebuilding front, and still a heavy supply, it’s not expected to increase much more. Also, the number of new households each year is rising, which is expected to help alleviate the oversupply in the coming years.

Published: June 10, 2011 Realty Times

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