The housing market has never been better for many potential buyers. In fact, in many U.S. metro areas it’s more affordable to buy than rent.
The National Low Income Housing Coalition reports that in 57 out of the 100 most populated metro areas, renting a three-bedroom home is more expensive than monthly costs on a six percent mortgage for a typical low-priced house in the same area.
Of course, buyers with strong credit are best positioned to take advantage of today’s opportunities. A high credit score will yield a lower interest rate and increase the likelihood that a loan application will be approved.
For example, a buyer with a 6 percent mortgage will pay a third less per month than a buyer who has a loan at 8 percent. This difference can be hundreds of dollars per month.
As a Realtor® I have had the opportunity of interviewing former renters who recently became homeowners to learn what factors influenced their decision to buy instead of continuing to rent.
The top reasons that seem to arise as to why you should own your own home usually begin with tax breaks. The Tax Code allows a deduction of the interest paid on your mortgage, your property taxes, as well as some of the costs involved in buying your home such as points.
Also, as you build equity in your home you have a ready-made “currently tax-free” savings plan. When you sell, you can take up to $250,000 ($500,000 for a married couple) as gain without owing any federal income tax. This can be taken advantage of through the sale of your primary residence every two (2) years.
Depending on what area of the country I made this next statement I might be run out of town on a rail, but real estate has long-term, stable growth in value. That’s right. In the long-run appreciation has been a constant in the housing market.
While yearly price fluctuations are normal, median existing-home sale prices have increased on average 6.5 percent each year from 1972 through 2005, and increased 88.5 percent over the last 10 years, according to the NATIONAL ASSOCIATION OF REALTORS®. In addition, the number of U.S. households is expected to rise 15 percent over the next decade, creating continued high demand for housing.
Let me refer you back to my column a few weeks ago entitled, “A ‘Case’ of Exaggeration,” where I referred to MSN Money Staff figures that showed our area actually was the 15th best performing market according to MSN in the past year compared to 300 other metro areas in the United States with appreciation during the last one, three, and five-year periods through June of this year.
The next reason that my clients have told me that they decided to buy versus rent is that money paid for rent is money that you’ll never see again, but mortgage payments let you build equity ownership interest in your home.
Unlike the life of a tenant where rent payments can and usually do go up, your fixed-mortgage payments don’t rise over the years so your housing costs may actually decline as you own the home longer. However, keep in mind that property taxes and insurance costs will increase.
Finally, the biggest benefit I hear from former renters is the ability to remain in one neighborhood for several years which gives you a chance to participate in community activities, lets you and your family establish lasting friendships, and offers your children the benefit of educational continuity.
In the end, the advantages seem to outweigh any disadvantages. Homeownership is still the American Dream. At least it is in the Greater Athens area!
