Rent vs Buy 2021

rent vs buy 2021
Increasing rent

Thinking of your Rent vs Buy 2021 question? Consider Quarterly Residential Vacancies and Homeownership released by the US Census (census.gov) for the third quarter of 2020 is very interesting.  First the good news is that the US homeownership rate is the highest it’s been in a decade!  The seasonally adjusted US homeownership rate of 68.2 percent recorded in the second quarter 2020, was the highest rate since 2007.  In fact, the homeownership rate hasn’t had two consecutive quarters above 67 percent since 2009.  As you remember, the homeownership rate progressively dropped through 2015 to hover in the 63 percent range, which was the lowest homeownership rate in several generations.

rent vs buy 2021
Homeownership rate 1997-2020

The story of the housing market this year has been nothing short of phenomenal.  Initially thwarted by a dismal spring market, only to rebound at a record setting pace.  Even with historically low existing home sale inventory and rising home prices, eager home buyers are actively pursuing homeownership. 

On the flip side, the second and third quarter US rental vacancy rates are the lowest since 2008.  And the mean US rental asking rent of $1,600 marks a high point as rents continue to creep higher.  Of course, homeownership rates and rental vacancies will vary significantly depending on the region and locality.  However, looking at the US averages is a good benchmark to see trends develop.

For many, comparing increasing rent versus a low interest mortgage rates makes buying a home the answer to the rent vs buy 2021 question.  A November 8, 2012 article from Realtor Magazine (Rising Rents Press More Americans to Make Big Decision; magazine.realtor) describes the renter’s plight, by saying, “Rental price expectations continue to rise and are much higher than home price expectations…” This sentiment continues to hold true.  Besides escaping rising rents, many home buyers are drawn to the touted benefits of homeownership, including increased well-being and wealth-building.

How do you know if renting or buying is better?  First, when deciding on the rent vs buy 2021 question, there are many other considerations besides rising rents.  Consider how long you intend to live in the area.  Renting is often the housing solution if you think your residence in the area is temporary. 

Next, if you don’t already have one, create a housing budget.  Besides deciding on how much rent you can afford, talk to a mortgage lender to get prequalified to further help you understand how much you can afford to pay for mortgage or rent. 

Once you have a budget of what you can afford, create an estimated renter’s and home owner’s budget to compare.  Besides the basic housing payment (rent or mortgage), there are other items that need to be taken into account and can vary depending if you rent or own.  These other items include (but not limited to) monthly utilities, insurance, and maintenance.  To help with estimating the “extras,” start by asking the landlord and/or home seller for twelve months of utility bills (Montgomery County MD requires home sellers to provide this for owner-occupied homes).  Ask your insurance agent for a quote to compare renters’ vs homeowners’ insurance. 

Home maintenance is usually forgotten and not budgeted.  Tenants typically have minimal maintenance, which is an attraction to renting.  Generally, home maintenance for owners usually includes having seasonal or annual inspections on the home’s systems (e.g., HVAC, roof, etc).  Additionally, you have to budget to repair and/or replace systems as they age. 

By Dan Krell
Copyright © 2020

Original located at https://dankrell.com/blog/2020/12/13/rent-vs-buy-2021/

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

Buy vs rent market

buy vs rent
Buy vs Rent Housing Market (infographic from keepingcurrentmatters.com)

After last year’s active spring, the housing market’s fall home sale decline shocked many.  Although home sales were on target to outpace the previous year’s activity, the slowdown diminished the spring’s impact.  In fact, the National Association of Realtors (nar.realtor) January 22nd press release indicated a sharp decline of home sales during December.  The 6.4 percent month over month nationwide decline should not have been a surprise because of the season.  However, December’s nationwide 10.3 percent sales decline from the previous year is significant.  The Greater Capital Area Association of Realtors (gcaar.com) indicated that Montgomery County single family home sales decreased 12.2 percent during December. Is this an indication of another buy vs rent market?

Back in August, I predicted and discussed the causes for the fall’s sales slowdown.  Among the issues that contributed to the slowdown include increasing mortgage rates and the continued home sale inventory shortage. However, it’s important to note that although home sales seemed to go to sleep during the early winter, home sale prices continue to increase.  It’s not the 4-5 percent price gain that home owners have become accustomed.  But the 2.9 percent nationwide price increase (2.7 percent increase in Montgomery County) during December is indicative that home ownership is still valued.

Although there are many who are saying it’s now a buyer’s market, it’s not entirely true.  The current housing environment has home buyers under pressure.  Increasing mortgage interest rates are making buying a home more expensive, and there are not many homes from which to choose.  Consequently, motivated home buyers who are eager to buy a home during the winter are pushing back against high home prices.  The reality is that home sellers will remain in the driver’s seat as long as they price their homes correctly.

There is a lot of promise for the spring, but it still depends on many factors (such as inventory).  But the push back on increasing home prices will likely continue, as home buyers are increasingly sensitive to housing costs.  “Buy vs rent” and housing affordability will once again become hot topics this spring. 

Buy vs rent is on the mind of home buyers. Although buyers are in the market to buy, there is no urgency. However, it’s clear that this market is about value.

If you’re a home buyer trying to figure out the market, consulting with a professional Realtor can help you decide if it’s the right time to buy a home.  Trulia’s Rent vs. Buy Calculator (trulia.com/rent_vs_buy/) is a tool that compares the cost of buying to renting a home over time in a specific area.  It can estimate the point at which home buying is better than renting.  However, depending on your budget and area, renting may be a better financial option.  Montgomery County Department of Housing and Community Affairs (montgomerycountymd.gov/DHCA) and the Housing Opportunities Commission (hocmc.org) offers affordable housing programs for first time home buyers and renters.

If you’re a home seller, think back to the 2014 spring housing market when home buyers pushed back at the sharp home price gains of 2013.  It’s recommended that you don’t take home buyers for granted, buyers are just as savvy as you.  Keep in mind that buyers are thinking about “buy vs rent.” Don’t over-price your home, however expect to negotiate the price.  Make your home show its best through preparation and staging.  Stay away from cheap renovations meant to look expensive, this can actually decrease your home’s value.  If you’re selling “by owner,” consider consulting a staging professional to help prepare and stage your home.  If you’re listing your home with a Realtor, your agent should have a strategy to sell for top dollar in this market. 

By Dan Krell. Copyright © 2019.

Original published at https://dankrell.com/blog/2019/01/25/buy-vs-rent-housing-market

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

Rent vs Buy puzzle

rent vs buy
The Rent vs Buy decision is a personal puzzle (infographic from keepingcurrentmatters.com)

For some, committing to buying a home is an easy decision.  However, some struggle rationalizing homeownership.  Adding to the confusion are the attempts to persuade tenants to be home owners by flaunting its benefits and financial savvy.  To be sure, there are personal and financial factors that go into deciding Rent vs Buy.  However, the reality is that the Rent vs Buy question is a complicated personal puzzle.

Are you weighing the decision of Rent vs Buy?  Consider that homeownership does have benefits over renting.  Besides having a place to live, the consensus is that homeownership provides stability and belonging to a community.   Numerous studies have associated being a home owner with increased well being and better health outcomes.  Research by the Harvard University’s Joint Center for Housing Studies concluded that homeownership and growing wealth are associated (Herbert, McCue, and Sanchez-Moyano; Is Homeownership Still an Effective Means of Building Wealth for Low-income and Minority Households? Was it Ever? Joint Center for Housing Studies Harvard University, September 2013).

But frustrated home buyers are returning to their rentals because of inventory shortages, intense competition, and increased home prices can be aggravating.

The latest National Association of Realtors (nar.realtor) press release indicted a 1.5 percent decrease in home sales from the previous year.  Although home sales were weak for the previous four months, home prices have increased for the 70th consecutive month!  Nationwide median existing home prices increased 4.6 percent from the previous year to $264,800.  The lack of home sale inventory is partly to blame for the decreased home sales, which increases the upward pressure on home prices.

The Greater Capital Association of Realtors (gcaar.com) release of August housing data for Montgomery County is not much different from the national figures.  Single-family home sales in the county decreased 0.7 percent from the previous year.  Inventory is 8.3 percent below last year’s available homes for sale at the end of August.  But median home sale prices jumped to $443,000, which is an increase of 4.2 percent.

Those who are dissuaded from buying a home because of increasing home prices are facing rent increases.  The median rent for Montgomery County is $1,647.  But according to Healthy Montgomery (healthymontgomery.org), there is upward pressure on rent.  This is not just a local phenomenon, it is nationwide.  According to the Census Bureau (census.gov), some metropolitan areas and cities have experienced increases well over $300.  Rent increases are in part due to inflation and the increasing cost of owning a rental property.  However, tenants are mainly experiencing rent increases because of supply and demand.  Rental inventory is just as tight as home sale inventory.  The Census Bureau reported that the vacancy rate decreased year over year.  Additionally, the Census Bureau reported last year that the percentage of renters who moved during 2017 was the lowest recorded since 1988.

The robust economy has prompted the Fed to increase interest rates this year.  Another rate hike is expected this week.  According to Freddie Mac (freddiemac.com), mortgage rates have increased in anticipation of the Fed’s rate hike.  According to Freddie Mac’s Mortgage Market Survey, the average 30-year fixed rate mortgage is 4.65 percent.  Although mortgage rates are the highest in several years, rates continue to be historically low.

For many who continue to rent, they’re perspective may be justified by comparing housing costs.  The Trulia Rent vs Buy Calculator (trulia.com/rent_vs_buy) is a tool that compares these factors.  Paying rent for a long term may make sense if your rent is low.  However, buying can be a better long-term decision when comparing similar size properties and housing costs.

Consulting with  Realtor can help too. You can find out which is feasible Rent vs Buy. You can see if there are any homes for sale in your affordability range. You can also find out what rentals are available in your rent range.  Regardless of your Rent vs Buy decision, your real estate agent can assist you with housing and the process for home buying or renting.

By Dan Krell.
Copyright © 2018.

Original located at https://dankrell.com/blog/2018/09/27/rent-vs-buy-puzzle

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

Rental search in a tight market

rental
Finding a rental (infographic from appfolio.com)

Some housing experts are excited about the recent one-half of one percent uptick in the homeownership rate, saying it’s at a three year high. But the Census’ most recent release of the Quarterly Residential Vacancies (Fourth Quarter 2017) and Homeownership described the move as “not statistically different” from the previous quarter or year (census.gov). Essentially, the homeownership rate remains historically low. This dovetails with the Census’ most recent renter moving data indicating that the percentage of renters who moved in 2017 was the lowest since 1988. So, it should not be a surprise that rents are on the rise, and it’s becoming even more difficult to find a rental.

How can you find a rental in a tight market?

Before you go off and sign a lease, you should create your own “rental guide.” First, make a housing budget of how much you can afford for rent and utilities. Then make a list of “must haves” for your new home. Think about the size, location, local amenities, commuter routes and public transportation, and anything else you deem important. This guide will help you stay focused on your needs, and help you decide on a rental that makes sense.

home ownershipOnce you begin looking for a rental, you may realize that finding a rental that “checks all the boxes” may be difficult. You may find that rent per square foot varies depending on the neighborhood, age of the building, and the amenities. This may force you to prioritize your needs. For example, you may find that a small condo near a metro station is the same rent as a three-bedroom single family home that has a longer commute. Or there may be a new apartment available with luxury amenities with a higher rent than the older apartment building with sparse amenities.

The internet is the medium of choice these days to look for a rental. There are numerous websites using state of the art applications to advertise rental listings. They also include vast amounts of information on each listing to help your search. There are a number of specialty sites focusing on niche rentals (such as apartments, luxury, etc.) that tout their exclusive listings. However, there are sites that are more comprehensive that include a mix MLS and private listings. And let’s forget there are online classifieds too.

Many renters search for their new home without an agent, and that’s ok. But consider that an experienced licensed real estate agent can help negotiate your lease, possibly getting better terms. While most agents will work rentals and sales, there are real estate agencies that specialize in rentals. Consider contacting legitimate property managers or rental management companies and ask about their upcoming rental listings.

If a rental listing sounds too good to be true, then be suspicious of a scam. To protect yourself from scammers, it can be helpful to understand how they operate. The Federal Trade Commission (ftc.gov) offers insight on how rental scams work, and how to report scams.  Scams are typically from hijacked ads or phantom rentals.  The FBI (fbi.gov) and USA.gov also offer tips on protecting yourself from rental scams.

Some basic cautions from the FBI:

-Only deal with landlords or renters who are local;
-Be suspicious if you’re asked to only use a wire transfer service;
-Beware of e-mail correspondence from the “landlord” that’s written in poor or broken English;
-Research the average rental rates in that area and be suspicious if the rate is significantly lower;
-Don’t give out personal information, like social security, bank account, or credit card numbers.

Regardless whether you go it alone or with a real estate agent, practice due diligence. Real estate scams have been part of the rental scene for decades. Scams have become more prevalent with the increased reliance on the internet for home searches. And in a tight housing market, it’s no coincidence that real estate scams are on the rise.

Original published at https://dankrell.com/blog/2018/02/03/rental-search/

By Dan Krell
Copyright © 2018

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

Homeseller turned landlord

Dan Krell, Realtor®
DanKrell.com
© 2012

Reluctant home sellers turn to renting their homes.

home for saleHanding over the keys of your most expensive investment to another person is not how you think you would have moved on with your life.  But, because the housing market threw a wrench in many peoples’ plans, many home owners who could not sell their homes decided to rent it instead.  Unfortunately, some didn’t know what to expect from their tenants, while others didn’t realize that they had obligations as a landlord.  And as you might imagine some rental arrangements did not turn out so well.

Although the home owner turned landlord may feel kinship to the hard core real estate investor, there are some differences.  Unlike the genuine real estate investor, most people are not accustomed to leaving their home in another’s care (often the person is a total stranger).  Another difference is that the home owner may decide to rent their home to ride out the housing market, while the hard core investor has made a commitment to the real estate investment as a vehicle for accumulating wealth; many investors will hold property for many years looking forward to the future payoff of appreciation when the property is sold.

Of course there is a commonality too; the desire for positive cash flow.  The positive cash flow is the perpetual incoming of cash so the mortgages and other real estate related expenses (such as property taxes, HOA/condo dues, maintenance, insurance, etc.) can be paid. Although a positive cash flow is a good thing, some are content just to break even and have no net proceeds from the rental.  Expenses can add up quickly and turn the rental into a negative cash flow situation (when the rent does not cover all the home expenses); which can became the source of serious financial issues.

home for saleSo, you decided to rent your home (or maybe you were talked into it) so you could move on with your life, what now?  Finding tenants and maintaining the property can be an issue for the novice and experienced alike.  Although seasoned real estate investors have systems in place for various aspects of their business (from finding tenants to collecting rent); you might consider hiring a licensed professional to manage your rental property.  For a fee, professional property managers take care of your rental property: which can include finding tenants, collect rents, and maintain the property.

And since rental agreements can be rather legally complex, consulting with an attorney prior to entering into the agreement would be prudent; as well as consulting with an attorney when issues arise between you and your tenant.

Consider getting additional information about rental properties before embarking on your new journey.   Some municipalities and local governments offer resources to inform you of your obligations and provide additional resources.  For example, the local government of Montgomery County MD offers resources for landlords and tenants.  Besides the “Commission on Landlord – Tenant Affairs,” which hears landlord – tenant disputes; other resources are available including a description of “ordinary wear and tear,” and links to the District Court of Maryland listing actions a landlord can take against a tenant (and vise verse).

What seems to be a comprehensive guide is the “Landlord – Tenant Handbook,” which is offered as a manual to renting for both the landlord and tenant.  The handbook describes: the obligations of the landlord and tenant; property licensing requirements; rental application and lease; security deposits; property maintenance; complaints; terminating the lease; and “survival tips.” The handbook and other landlord – tenant resources can be found at montgomerycountymd.gov/dhca (click the “Landlord & Tenant” link).

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(if this article appears anywhere other than a feed originating from, or directly on DanKrell.com, the article has been re-posted without permission).
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This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of September 10 , 2012. Using this article without permission is a violation of copyright laws. Copyright © 2012 Dan Krell.