Why Renters Should Buy Now
67% of renters are planning to buy a home in the next five years.* That sounds like a reasonable timetable, doesn’t it? Renters can save toward a down payment, reduce debt, research communities and keep a watchful eye on prices and interest rates.
But five years may be too late.
Many credible news sources, such as CBS Money Watch, The Wall Street Journal and MSNBC, are urging renters to buy now.
They argue that current market conditions are optimal for making the leap into homeownership. Here’s why:
1. Rental hikes of 5% are forecast. The supply of rental properties is tightening and vacancy rates are dropping. As a result, landlords in many parts of the country are raising the rent as much as 5%, an increase that could be repeated in 2012.
2. Home prices are bottoming out. Home prices are down more than 30% from the peak in 2006, and most sources agree that the worst of the price decline is over. In many markets, prices have dipped so low that it now makes the cost of buying a better financial deal than renting.
3. Interest rates have nowhere to go, but up. Today’s rates are at a 50-year low. Predictions for 2012 have interest rates climbing more than a full percentage point higher.
4. Interest rate increases will likely outpace housing price reductions. A 1% rate increase would need to be balanced by a 12% reduction in home prices to garner a lower monthly payment on a 30-year mortgage. Experts suggest that home prices are unlikely to drop more than 5% in the year ahead.
5. Qualifying for a mortgage is expected to get harder. With Fannie Mae and Freddie Mac being restructured or disassembled, borrowers can expect lending requirements to get tougher and more expensive.
There are many reasons to buy now. And of course, the long-term benefits of homeownership still apply – including the possible accrual of equity, current tax breaks, access to schools and other quality-of-life issues.
What’s the obstacle for most renters?
Just 35% of renters have the minimum 3.5% down payment needed for an FHA loan on the median-priced home in their market.*
Pardee Homes can help. Our HomewardBound program offers free budgeting assistance and credit analysis and refundable credit repair services for any of our homebuyers who need help getting ready to buy a new home. Call today, and we’ll help you evaluate all your options.
Another Smart Solution from a Homebuilder you trust.
*survey by Zelman & Associates