After the last five years, more and more people are hesitant about purchasing a home. We definitely understand their concern. However, is the alternative option actually a better choice? Renting in the current housing market might not make good financial sense. Just this week the Harvard University Joint Center for Housing Studies released a report analyzing conditions in the rental market. The study found:
Rental markets are now tightening, with vacancy rates falling and rents climbing. With little new supply of multifamily units in the pipeline, rents could rise sharply as demand increases.
This increase in rental costs is already taking place. In their Spring 2011 Housing Report released earlier this week, hotpads.com stated:
…that rental listing prices across the US climbed 7.4 percent while for sale listing prices retreated 8.8 percent since this time last year (April 2010 – April 2011).
Just yesterday, Trulia released its second quarter 2011 Rent vs. Buy Index. In the report, they stated that buying a home has become more affordable than renting in nearly four out of five (78%) major cities.
“With home prices nearing a double dip and more foreclosures expected to flood the housing market over the next two years, the decision between renting and buying a home across most of the country has clearly moved in favor of buying,” says Ken Shuman, Head of Communications at Trulia. “As we head into the summer buying season, those looking to buy a home should be encouraged by improvements in the market and feel optimistic about their chances of finding an affordable home, much more so than in previous years.”
“Aspiring homeowners should focus their energies on locking down a low mortgage rate sooner than later. While home prices are unlikely to return to pre-crash levels, today’s low interest rates will likely rise thanks to inflation and spikes in the Fed rates,” notes Shuman. “As the government wind downs its role in the mortgage markets higher mortgage interest rates will be inevitable.”
Bottom Line
Though purchasing a home is not an easy decision after what has taken place in the market over the last five years, realize rental prices are about to soar. You should probably take this into consideration when determining your best housing choice.
