The 2011 decision: To rent or to purchase?
Residential purchases by investors and buyers alike are on the rise, coming out of winter’s sluggish sales. Yet many qualified potential homeowners are holding back. Why purchase a home now?
There is no one-size-fits-all when deciding whether to buy a house in 2011. But one consideration might be whether you plan to sell in the next 2-5 years. With scientific guesstimates predicting slow growth even when the elevator reaches bottom, combined with selling costs of 8-10 percent you might ask yourself ...
Do you have relative confidence that your jobs are secure; are there any red flags from the company? (Though today, company red flags are Friday’s pink slips.) Is there a desire to move near family or loved ones?
On the “rent” side of the evaluation, if you have reason to believe that you might need or want to sell in a few years, renting might be a wise choice.
It’s especially wise if you consider the anticipated slow growth over still-adjusting house values with increasing competition from short sales and bank-owned properties – though it’s somewhat alleviated by tax advantages of homeownership. Balanced with cost to sell, renting may be brilliant.
Of course, there are negatives in renting no matter your situation.
The growing pool of former owners who’ve entered the rental pool is causing an inordinately rapid increase in rents.
Clients of mine have been renting for three years at Merrill Creek Apartments with annual increases. They were just told their rent would increase $500 a month for a month-to-month extension or $300 for another one-year lease!
On the “buy” side of considerations, property values are dipping to 2002 values. For sellers that equates to nearly a decade of ‘lost equity.’ But out of that worldwide tragedy has come a treasure trove of great buys for purchasers.
Additionally, interest rates in 2002 for a 30-year fixed mortgage were in the 7 percent range. Currently they hover around 4.5 percent. That means a $400,000 mortgage in 2002 was a basic monthly payment of $2,661, while today, that same mortgage would be approximately $2,027! Amortized out over 30 years?! ( HYPERLINK "http://www.mortgagemavin.com" www.mortgagemavin.com)
More house, lower payments and perhaps you’ve had the last decades to increase your income level. It’s a G.R.E.A.T. time to buy. And waiting for the illusive “bottom” just doesn’t make sense when you combine all the factors.
Owning your home is priceless – even putting monetary tax benefits aside. There are no guarantees and any life analysis is an imperfect predictor of the future: job security, marital fidelity, marriage, better job offers, etc.
“Could housing prices fall further?” must be balanced with “Will interest rates rise?” and “Will the housing market recover sooner than predicted?”
Home should return to the basic intent: shelter. Did we lose sight? Whether through a rental home or your mortgaged home – it remains four walls, a roof and working systems. A place to lay your head at night, hopefully at peace with the decisions you made that day.
Home should no longer to be seen as either investment in the future or an endless bank account from which to endlessly draw.
For those with a blessed, relatively stable life who qualify to buy, the privilege of owning your own home enables you to make added deposits into that same-home-they-grew-up-in family memory bank... your signature: “Our Home.”
And if you do choose to invest, then owning your own home is security for today – and in these times, that’s not too shabby an investment.Elizabeth Erickson is owner and designated broker of Gallery Homes Real Estate. Contact her at email@example.com or at the office: 425-212-4300 or direct: 425-508-1405, or go to www.galleryhomesre.com.