It’s not just interest rates and prices indicating improvement for the housing market. When buying becomes more advantageous than renting, it’s a sign conditions are becoming stronger.
For 2015, is the market leaning toward buyers? Or is renting still your best bet?
After a couple years of growth, 2015 appears to have reached a plateau. However, this year has seen lower interest rates, gains in the stock market, and median home prices just eight percent higher than they were in 2013. By contrast, the average rent payment grew 12 percent over this time.
What buyers have to realize is, since the Recession, purchasing a home has turned into a long-term investment. House-flipping no longer generates a high pay out, but if you’re expecting to live in the property for five to seven years, you’re purchasing something that builds equity over time, acts as an asset, and could potentially see its value increase, especially if you make improvements later on.
Right now, the market has reached a lull. Prices aren’t increasing, but within five years, when Millennials gain better purchasing power, that trend could reverse. Essentially, purchasing in 2015 means getting a deal before prices go up.
Renting, on the other hand, has seen rates rise faster than the pace of income over the past 14 years. As well, Trulia.com indicates that, on a national level, buying ends up being 35-percent cheaper than renting. Keep in mind that figures vary with each local market; rents and mortgage payments are closer in the Northeast and on the West Coast than they are everywhere else.
Too, it has been pointed out that the strongest markets for buying are where your theoretical childhood home was – or, specifically, where your parents or grandparents would have lived. Rather than focus on the cities, buyers have been turning toward “bedroom” and commuter communities.
Not everyone will find 2015’s conditions ideal for purchasing a home. Economic recovery and employment opportunities often involve moving, and if you plan on picking up and setting down in another state over the next few years, renting proves to be a better deal, as it costs less to break a lease than to put a property on the market.
As well, the price increases seen before the Recession don’t appear to be coming back any time soon. As a result, purchasing is no longer a transitory decision. Prices don’t always rise, and years down the line, you could simply break even.
How do you know if it’s better to rent or buy? Compare the location’s price-to-rent ratio: Under 15 means the market is ideal for buyers, and if it’s above 20, renters have the advantage.
Considering buying a home in Central Connecticut? Browse By Carrier’s communities as a place to start.