Should I or Shouldn’t I?
Buying vs. Renting in Todays Market.
What is YOUR American dream? The dream most people conjure up typically involves owning a home. Is it the same for you? Unfortunately, if you’re anything like most of us, the decline of the economy has really put a damper on your future goals. While the marketing crash affected the whole country, the severity of the bursted housing bubble and its subsequent recovery time vary dramatically between areas. Since the real estate market is a localized industry you can’t depend on the answers found in the pages of the New York Times or the Washington Post to determine whether or not buying is right for you. Instead, you need to talk to a local real estate agent and mortgage lender to safely determine your ability to purchase a home. If you’re looking for a home in the Commonwealth of Virginia and wondering whether it’s better to buy or rent, read on.
The idea of rent payment vs. mortgage payment is not the main question that needs to be answered when considering purchasing a home. You first need to ask yourself — “am I even ready to settle down“? If you’re thinking about traveling for a year, or maybe imagine a move in the near future, buying a home might not be in your best interest. You don’t need to know the exact area you want to purchase a property to know you’re ready to buy, but rather that you’re willing to stay in one location for a few years so you can gain equity in your home.
Now, lets talk supply and demand. According to notable media sources, the Commonwealth of Virginia is on fire. CNN Money declared Richmond the #4 “hottest housing market for 2014,” while Forbes named Richmond #23 for “Best cities and neighborhoods for millennials.” Richmond seems to be everywhere; top 50 this, top 10 that. Richmond’s increasing notoriety has produced a steady stream of new residents, meaning a bigger demand for homes. What happens when demand rises and supply goes down? Prices increase. If you bought a home in the Fan District of Richmond in 2013, your price per square foot could have risen upwards of $15 in just one year. It’s not just the City of Richmond whose sale prices have seen an increase; the Commonwealth in its entirety has grown from the city’s success. If you bought a home in 2011 with 1,500 sq. ft. or less in the western portion of Henrico County your price per square foot would have increased an average of $10.
Prices are on the rise, and don’t seem to be slowing down, which gives your new home the ability to appreciate. We know what that means for owners, but what does it mean for renters? Well, it means increased rental cost. The rental market varies based on inflation and interest rates, while home owners with a fixed rate mortgage can rest assured knowing that year after year they will be making the same monthly payments. Still think renting may be better for you? Well consider the fact that mortgage rates are still floating around 4.2%. I feel like an obnoxious radio ad, “These are below recession rates!”, but really, it’s true. The Fannie Mac annual average rate for 2005 was 5.87%. We would all love the rates to stay this low, but the ebbs and flows of the economy are sure to alter this at some point, making NOW a good time to lock in your rate and buy yourself a home.
All of this sounds fine and dandy, but what if you don’t have the credit to apply for a loan, or the money to put down on a house? Well, my advice is to speak with a mortgage lender to make sure this is true. Some loans allow for lower credit scores, while others don’t require any money down. If you still can’t make purchasing a home work for you, the mortgage lender you spoke with will be able to put you on the fast track to clearing reports and raising scores. Once you’ve gotten a pre-approval letter it is time to find yourself a realtor, and we hope you pick us to help find your dream home.