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It is Better to Rent Than Buy

07 Sep 2018

Posted by Joseph Coupal

HHHunt ApartmentsIt is easily the question most asked by anyone moving into their first home or downsizing into retirement. Should I buy or should I rent? For nearly a decade the answer has been buy. The crash in home prices, combined with record-low mortgage rates made buying and owning a home both cheaper than renting one and a better investment.

Now, the tide has turned.

Fast-rising home prices and higher mortgage rates have shifted the calculation to rent. The monthly costs of buying and owning a home that you occupy are up 14 percent over the past year, more than three times the annual increase in rent rates nationally. Rents are up just 4 percent. The number of local housing markets where it is cheaper to rent than buy is growing by the day.

Even setting aside big upfront expenses like a down payment, rising month-by-month costs are likely keeping many people from purchasing. Today only 41 percent of people live in a county where the median income family can afford to buy a home at the median list price, and affordability declined significantly over the past year.

Home prices fell dramatically following the financial crisis and the subprime mortgage crash. Millions of homes went into foreclosure and were sold off at bargain-basement prices. Home values finally bottomed out in 2012 and then began to take off. In the last three years, the gains accelerated dramatically, and now homes in most of the nation are worth more than they were at the inflated peak of the housing boom in 2006.

It's normal. Housing is an early cycle sector. Interest rates are low, incomes start to grow, so in an early cycle environment you can buy, but in a later cycle, interest rates go up, home prices go up, it's harder to buy.

The recent acceleration in home prices has been due to a supply imbalance in the market: too much demand and too little supply. That has shifted the equation back to rent, even though rents have increased a lot in the last few years.

According to July home and rent prices, buying a home was cheaper than renting in just 35 percent of the nation's counties. That is down sharply from 44 percent just one year ago.

And it's not just cheaper to rent, it may also now be a better investment. Renting and reinvesting the savings from renting, on average, will outperform owning and building home equity, in terms of wealth creation. That is the first time renting outperforms buying since 2010.

In 16 of the 23 major metropolitan markets covered in the research, renting is a better investment than buying.

So what does all this mean for the wealth of average Americans and the health of the housing market?

Since home ownership has historically been an important source of household wealth creation, it could be problematic if this trend continues for too long. Still, even in places where renting is currently more affordable, rising home prices provide wealth-building opportunity for home buyers.

Since home ownership has historically been an important source of household wealth creation, it could be problematic if this trend continues for too long.

As for home prices, the shift pulling demand away from buying and toward renting will likely cool overheated home prices. In fact, that is already happening. For the first time in several years, in July, the supply of homes for sale was not lower compared to the previous year. It was flat. In addition, while home prices are still rising, they are rising at a slower pace, meaning sellers are starting to see demand fall off a bit, as buyers hit an affordability wall.

Absent some major outlying disaster, home prices are highly unlikely to fall, at least not nationally.

For more information on apartments, contact HHHunt.

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CNBC

Renters Create More Wealth than Buyers

03 Jul 2018

Posted by Joseph Coupal

HHHunt ApartmentsWith housing markets around the U.S. nearing the peak in their cycles, renters who reinvest their money have an increasingly better chance at creating wealth than individuals who purchase a home, according to the latest national index.

"On the heels of information concerning slowing housing starts, rising mortgage rates, decreased demand and unsustainable price increases, these numbers provide additional evidence that housing markets around the country are slowing, resulting in many to opt for renting," said Ken Johnson, Ph.D., a real estate economist and one of the index's creators in FAU's College of Business.

Of the 23 separate metro areas, many are nearing the top of their current housing cycle, meaning they are above their long-term pricing trend.

The biggest contributor to the rising cost of ownership is rising house prices.

The current scores driving the markets in the direction of renting and reinvesting appear to be the results of higher mortgage rates, increase in returns, on average, in the stock market, and the cost of ownership, which includes your mortgage payment, taxes, insurance, maintenance, etc.

All of these costs are rising faster than the cost of renting a comparable property. Therefore, renters who take the money they're saving each month and reinvest it are going to build wealth faster than those who buy a home, on average.

For more information on apartments, contact HHHunt.

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prnewswire.com

Homeownership Hidden Costs Often Top $9K a Year

05 Jun 2018

Posted by Joseph Coupal

HHHunt ApartmentsPrepare yourself by knowing the less-obvious costs of owning a home. Insurance, maintenance and more add up faster than you think.

Buyers too often focus on a home’s list price or mortgage payment to determine what they can afford. However, the numerous less-obvious costs associated with homeownership can affect the monthly bottom line.

To help home buyers budget more accurately, Zillow and Thumbtack identified several common but often overlooked home expenses and calculated what homeowners around the country could expect to pay for them. The analysis also included utility cost estimates.

While each extra expense might seem small, they cost U.S. homeowners, on average, $9,080 a year, according to the report.

Unavoidable costs

Nationally, homeowners pay an average of $6,059 a year in unavoidable costs, which include homeowners insurance, property taxes and utilities. Since nearly half (47 percent) of home shoppers today are first-time buyers, many of these extra costs may come as a surprise.

Maintenance expenses

Nearly all homeowners (96 percent) have made some kind of improvement to their homes. While many complete these projects themselves, those who pay professionals can expect to spend an average of $3,021 for the six most common hired home projects: carpet cleaning, yard work, gutter cleaning, HVAC maintenance, house cleaning and pressure washing.

Budget planning

More than a third of buyers go over budget on a home purchase. In addition to the mortgage, the price includes estimated property taxes, insurance, PMI, utilities, taxes, HOA fees and closing costs.

For more information on apartments, contact HHHunt.

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zillow.com

The Rent or Buy Debate Doesn't Make Sense

20 Mar 2018

Posted by Joseph Coupal

HHHunt ApartmentsWhen you buy a home, you pay for things you don’t have to pay for as a renter: loan interest, property taxes, insurance, and even maintenance and repair costs. That’s part of the argument in favor of renting: there are so many additional costs and factors that get overlooked. That goes for both sides, though, and the details vary depending on the situation. Here are a few commonly overlooked factors that make up the specifics.

  • How long you’ll live in the home: This varies depending on the market, but in general, the longer you’re in the home, the better, because your costs are spread out over time.
  • The cost of housing in your area: In most cases, people rent because houses are just too expensive, but it all depends on the market in your area. If renting is extremely costly in your area, it might be more affordable to buy a home.
  • The opportunity cost of your taxes and insurance: What kind of long-term return could you get if you invested this money instead, in the stock market, a CD, or even a “high interest” savings account?
  • The opportunity cost of your down payment: Similarly, how much of a return could you get if you invested that lump sum instead?

It’s impossible to say renting or buying is a better decision because each one of these factors (and more) depends on your unique situation. You have to consider where you live, what kind of house you’re looking for, how much you pay in rent, how much you’ll pay in the future...the list goes on and on.

A Rent vs. Buy calculator is a great tool for simplifying these complexities, depending on your own individual specifics. Still, a calculator can only do so much. It might tell you the better long-term decision on paper, but that still doesn’t mean it’s the best decision for you.

Your Home is a Purchase, Not an Investment

Most experts agree that you shouldn’t think of your primary home as an investment. Contrary to popular belief, real estate barely outpaces inflation over time. Sure, you could time the market, flip a house, or buy a rental, but that’s different from expecting your primary home to earn you a sweet return. The investing myth is another valid argument against buying. Many people buy homes they can’t afford or stretch their finances to pay for expensive home projects because they buy into this myth.

The bottom line is: sometimes it’s smarter to rent, and sometimes buying can work in your favor. Rather than giving in to one side or another, it’s more helpful to learn the rules, crunch the numbers, then do what works—and feels right—for you.

For more information on apartments, contact HHHunt.

#HowYouLive

Excerpts: twocents.lifehacker.com

When Renting is the Right Decision

06 Nov 2017

Posted by Joseph Coupal

HHHunt ApartmentsConventional wisdom suggests buying a home makes more financial sense than renting. In many cases, this is true. However, renting is sometimes a smarter approach than buying.

As with any financial decision, all of the options and circumstances need to be weighed before jumping in. Making a major purchase requires doing some homework. The following are some reasons why renting can be more beneficial than buying.

Youth

The typical first-time home buyer is 31-years-old. People who are younger than that and uncertain about their futures should not feel pressured into buying simply because it is presumed to be the “adult” thing to do. Renting and feeling your financial way, which can include seeing how a job pans out or where one’s budget lies after paying off debts, might make more financial sense than buying.

High price-to-rent ratio

Buying may seem like a wise idea, but it could be causing people to spend more than necessary, particularly if they check the price-to-rent ratio and find homes in their area are not fairly priced.

Figuring a P/R ratio includes finding two similar houses (or condos or apartments) where one is for sale and the other is for rent. Divide the sale price of the first place by the annual rent for the second. The end result is the P/R ratio.

The higher the P/R ratio, the more sense it makes to rent instead of buy.

Home prices continue to rise

Some people find themselves being priced out of certain neighborhoods or cities. While the typical worker’s earnings increased a meager 0.3 percent during the study period, median house prices were up by 17 percent. Wages have not recovered from the Great Recession as quickly as home prices have, and some people may need to rent out of necessity.

A market shortage makes it harder to find an affordable home. The number of homes available for sale in many areas of the country has fallen below the number that is required for the market to be in balance. Therefore, even when a home becomes available, demand drives the price up to where it may not be affordable or fiscally smart to purchase. In such instances, renting may be the best option.

One doesn’t meet the buying criteria

Individuals should not buy a home based on market conditions or pressure from others. Instead, they should buy when they’re financially ready. This means being out of debt; having between three and six months of expenses in an emergency fund; enough cash for a 10 to 20 percent down payment on a fixed mortgage; and when their mortgage payment will be no more than 25 percent of their monthly take-home pay.

Renting can be a smart move in many instances. Only when individuals are financially and emotionally ready to buy should they begin searching for their first homes.

For more information on apartments, contact HHHunt.

#HowYouLive

villagenews.com

Renting an Apartment Has Many Advantages

24 Oct 2017

Posted by Joseph Coupal

HHHunt Apartments - Buy or RentAdvantages Of Renting

While there are clearly benefits to buying a home, renting has some advantages that you should consider before you make a final decision to become a homeowner as a single parent.

Investment risk

While real estate is generally considered a good investment, there's no guaranteed profit. The value of your home depends on forces that you can’t control, like the job market, the supply of houses and zoning changes.

You can improve the worth of your home by taking care of it, and can increase your equity by paying down the mortgage balance, but if your home drops in value, you could lose money when you need to sell.

Maintenance

Renters benefit from the fact that the landlord is responsible for maintenance and repairs – both the cost and the hassle of hiring someone to take care of the property.

Buyers sometimes forget to budget for the inevitable cost of home repairs.

Flexibility to relocate

One of the biggest reasons to continue renting is the possibility that you may want to change jobs or transfer to a new location.

Or you may want to escape some awful new neighbors or decide you hate your commute.

Renters can more easily end a lease, while buyers need to sell their home or rent it out and become landlords themselves.

Fewer financial obligations

Of course, renters must pay rent, renter’s insurance and sometimes utility bills.

However, homeowners pay mortgage principal and interest, property taxes, homeowner’s insurance and utilities. There may also be homeowner’s association (HOA) fees and mortgage insurance.

In addition, single parent homeowners should budget about one percent of the property value each year for maintenance and repairs, or purchase a home warranty.

For more information on apartments, contact HHHunt.

#HowYouLive

Excerpts - themortgagereports.com

Renting is a Good Option for Many

03 Oct 2017

Posted by Joseph Coupal

HHHunt ApartmentsGenerations of Americans have considered owning their own home a key aspect of achieving the American Dream. But the lingering aftermath of the housing crash has caused many people to rethink that belief. Many are opting to rent an apartment rather than buy.

Long gone are the days when Americans assumed home ownership could only have a positive impact on their finances, and that renting was equivalent to throwing money away.

Like any debate, the question of renting versus buying has pros and cons on both sides. Buying a house creates the potential to build equity and provides a sense of stability, while renting affords a level of mobility. In many areas of the country, the gap between lease costs and monthly mortgage payments has narrowed, making both options equally affordable.

While the decision to rent or buy will depend on your personal circumstances, when you're considering the question some facts are universal. Among them: What impact might your credit have on your decision to buy or rent, and what impact will either option have on your credit score? How long do you plan on staying in this particular location, do you have job security and how much do you like home repairs and yard-work?

When you're evaluating whether buying a home or continuing to rent makes sense for you, consider all the facts as well as your lifestyle.

For information on renting contact HHHunt.

#HowYouLive

NorthNewJersey.com

Is Owning or Renting Better for Your Wallet?

14 Jun 2017

Posted by Joseph Coupal

HHHunt ApartmentsPart of being smart with your money means managing how much you buy. And while that might be as simple as not buying goods you don’t need, it might also mean considering alternatives to buying — like renting or leasing — to save money.

Opting to rent something has its own set of benefits. For example, you rarely have to make a large upfront payment the way you would with a purchase and you likely won’t need to worry about the ongoing cost of maintenance. However, rental costs can add up to more than you’d ever pay for an item in the first place, so it’s important to consider whether renting truly saves you money.

To help, we talked to the experts to find out when renting is the better option and when it’s better to buy.

Home vs. apartment

The decision to rent or buy a home usually isn’t purely financial. You might also crave the stability and pride of owning or the freedom to renovate and landscape how you want. But there are a few factors that make renting the better financial choice — namely, location.

Renting usually makes sense unless you are pretty sure you will stay in one home for at least five years. This is because there are several thousand dollars of transaction costs that come with buying, financing and, eventually, selling a home.

For more information on apartments, contact HHHunt.

#HowYouLive

The Citizens’ Voice

Should You Rent or Buy A Home? - Waldorf, MD

05 May 2017

Posted by Joseph Coupal

HHHunt ApartmentsHousing prices and interest rates are both rising. A lot of people are considering whether or not they should buy a home. But is homeownership the right choice for you and your finances? The answer of course, is "it depends." However, for many there is a clear answer based on where you live, how much money you have saved, and what your future plans are.

The "Rent vs. Own" debate rages on. Here are some important factors you should consider to help determine whether renting or owning a home is the right decision for you.

1. Basic Market Trends

The three most important criteria in setting the value of a home are "location, location, location." That is true, but you might want to add: "timing, timing, timing."

Anyone who watched the gut-wrenching rise and fall of the housing market during the past 10 years can knows that timing has a lot to do with if buying a home becomes a good investment or an anchor tied to your finances.

You want to avoid buying a house at the peak of a housing bubble, obviously!

But how to avoid it? To help you navigate these market variations, use the "price-to-rent" ratio. This is a formula that takes into account the price of renting versus the cost of buying in your area and gives you a sense of whether the market dynamics favor buying or renting.

Also remember that interest rates for mortgages fluctuate over time and it's always better to lock in a low interest rate if you can.

2. Your Financial Picture

One of the main considerations you have to make is this: does your current financial picture put you in a strong position for home ownership? If not, then buying a house will not be a good idea no matter what the market trends indicate.

Evaluate your finances and see if you're prepared for homeownership. Sit down and look at all your financial accounts as well as your income and expectation of future earnings and job security.

First, look at any debt you have and calculate how long it would take you to pay it off. If you have a lot of consumer debt and especially if you're struggling to make your monthly payments, then this may not be a good time for you to buy.

3. How Much Do You Have Saved Up?

Assuming that you're not worried about debt paydown or losing your job, then the most important factor to consider is how much savings you have. Many home purchases require 10 or 20% as a down payment on a mortgage.

The right down payment amount and home loan amount for you will depend on the factors mentioned above, but in general it's better to have a lot saved up before you apply for a mortgage.

4. What Are Your Future Plans?

One of the things you always hear people talk about is that it doesn't make sense to buy a house if you plan to move in the next five years -- and this is absolutely true. Why? Because buying a house requires lots of fees and "transaction costs" -- these costs are unavoidable and can total up to 5 percent of the cost of the house or more.

It still depends on the individual situation, of course, but the general rule is to avoid buying if you expect you'll need or want to move anytime soon. For more information on renting an apartment, contact HHHUnt.

#HowYouLive

ABC News

Downsizing Is Not Just for Empty-Nesters

22 Mar 2017

Posted by Joseph Coupal

HHHunt ApartmentsDownsizing into a smaller home has been a rite of passage almost exclusively for empty-nesters and retirees. But as home prices and mortgage rates rise and the inventory of homes for sale shrinks, younger generations might find upsides to downsizing earlier in life.

If you don’t need a bigger home, downsizing earlier could work in your favor. Here are three reasons why:

1. You’ll free up money for other financial goals. If you have a bigger home, much of your income is tied up in monthly mortgage payments. By getting a smaller, more affordable place, you could free up cash to put to work toward other goals such as college savings or retirement.

2. You could move into a better neighborhood. Most homeowners (whether they have kids or not) want to live in a desirable neighborhood where they can put down roots. Choosing a smaller place in a sought-after area over more space elsewhere is a trade-off with a lot of potential upside: better schools, increased walkability, more charm or lower crime.

3. You’ll simplify your life. A bigger home comes with more maintenance, costs and potential wasted space — all things you might not have anticipated. This is especially true if you’re now going through a major life event such as a divorce, illness or job change. In addition to less upkeep, downsizing can also provide financial peace of mind if you feel suffocated by your mortgage payments and other debts.

Some people are afraid of debt. They don’t mind living a simpler life to pay their home off faster and gain the confidence and comfort of being debt-free. For more information on apartments, contact HHHunt.

#HowYouLive
USA Today


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