Is it better to rent or buy in today’s market? There are pros and cons for each decision.
Renting offers more mobility, less responsibility and the possibility of having more amenities. Negatives include no tax benefits, no equity, the inability to customize and no control over rent increases.
Buying brings security, stability in payments and increases in equity and responsibility but decreases in mobility.
If you have decided to rent, there are things you should be aware of:
According to Freddie Mac’s Online Guide to Homeownership, approximately one third of American families rent both by choice and financial ability. Several factors contribute to this statistic. Short sales and foreclosures still run rampant throughout every neighborhood. The price range can create credit problems for the owners, forcing them into the rental market. With the more stringent mortgage requirements, many simply do not qualify for a loan. And, there is still the fear that home prices will continue to fall and buyers will be paying too much.
What effect is this having on the rental market? It seems like such a short time ago that rentals were plentiful in keeping prices down. With today’s shortage of inventory, prices are expected to gradually rise.
Ask any property manager about what they are experiencing and you will likely get the same answer. According to Keri Dutton, Windermere Property Management/Lori Gill & Associates, rentals have been renting at a much faster rate than even last year. She estimated that the increased interest has dropped the time on market to a mere 30 days. She has already seen a slight increase in prices being commanded by owners with buyers willing to pay those prices. She expects larger increases in the near future.
So, what is happening in Mercer Island?
According to a report released by local real estate consultants Dupre & Scott, Mercer Island rents are 48 percent above the county average. The study also showed the average monthly rent on Mercer Island in 2010 was $1443, or $1.60 per square foot.
Renting may be your best option but, finding the best home in the right location at an affordable price may be a problem.
Most of the existing, moderately-priced rental units aren't located in the walkable Town Center area. Instead, the newer Town Center rental developments run at nearly double the rental price (per square-foot) compared to the older developments, such as (a total of 645 units).
With rentals in short supply and prices rising, is buying a home becoming more attractive?
Ginnie Mae, Government National Mortgage Association, created a basic chart to explain the value of buying over renting. On their web site, genniemae.gov, they look at the difference of starting to pay rent at $800 and buying a home for $110,000. Following a progression of rent increases, a homeowner’s payment is lower than the renter’s monthly payment after six years. With the tax savings, the homeowner’s payment is less after only three years. This does not include the long-term financial security that comes with an increase in equity. These numbers are only guidelines but they can be used as a model for higher rent or home prices such as we find in this area.
With interest rates still at 50-year lows and home prices affordable, it is clear that buying a home still offers certain advantages. Uncertainty of how long either of these will last has created an urgency for working families with stable incomes and good credit to take advantage of this opportunity.