Home News Which is right for you?

Which is right for you?

by admin
0 comment

Are you suffering from analysis paralysis about buying a house or renting an apartment?

You are not alone these days. Rising mortgage rates have completely changed the equation for prospective first-time buyers.

Consider these complex market dynamics. Mortgage rates are nearly double what they were a year ago, but are still below historical averages. House prices are still trending upwards, but the increase is slowing rapidly. Buyers have more choice than last year, but homes are still selling in about a month.

What do prospective buyers do?

From a purely financial standpoint, rental prices in the Twin Cities are much lower than similarly sized markets and much less than what a typical home would pay for, so renting in a metropolitan area would be a mistake. It is inexpensive.

Zillow chief economist Jeff Tucker said the typical monthly rent for homes and apartments in the Twin Cities subway in August was $1,683, the 20th lowest among the 50 metropolitan areas and the typical for Twin Cities. Mortgage payments for a typical home were $2,181. This includes Principal, Interest, and Private His Mortgage Insurance (PMI), subject to a 5% down payment.

That $498 difference is bigger than any of the 19 markets with the lowest rents.

“That doesn’t necessarily mean that renting is the better financial option in the long run.” , meaning that leasing makes more economic sense in the Twin Cities than in other peer markets.”

Tucker said the market was rebalancing as higher mortgage rates sapped purchasing power. That said, buyers shouldn’t expect the horrendous price increases seen early in the pandemic.

“At the same time, if current cost savings are undermined by further increases in interest rates or higher rents, it could also disappoint buyers sitting on the sidelines of significant reductions in future purchase costs. .”

economists Realtor.com A similar analysis recently completed found that among the nation’s 50 metropolitan areas, rents in the Twin Cities rose the slowest in June, rising 3.3% year-on-year to a median of $1,597. I was. His 50 metropolitan area average in the US is $1,876.

The study was conducted when the average 30-year fixed rate mortgage was 5.52%. Today, it’s almost a full percentage point higher.

At the same time, the median list price for starter homes in the Twin Cities this summer was $279,408, up 13.8% from the previous year. The monthly cost of that starter home was $2,249, 34.2% higher than the previous year, and the monthly cost of buying a starter home was $652 (40.9%) higher than renting.

Rising mortgage rates, stable rents, and rising home prices have made the monthly cost of renting a home less than the cost of buying a first home in 38 of the 50 largest US cities. That’s a sharp increase from his January, when the same analysis in just 24 markets showed that renting makes more sense than buying.

Experts say the economics of a purchase are important, but there are other factors to consider.

  • How long do you plan to live in that house? Selling a home is expensive, so if you only plan to live in the home for a few years during a period of slow home price appreciation, you may not have enough equity capital to cover the costs.
  • Could rents rise in your area?
  • There are also lifestyle differences. Do you want a maintenance-free life, do you love gardening, or do you need a large garden for some reason?

Jeff Wills, a homeownership counselor who regularly helps people decide when it’s time to buy, says affordability always comes to the fore in conversations with people considering their options. said to be out.

“It’s hard to draw with a wide brush because the individual circumstances of many consumers are different,” he said.

Wills, program manager for the Minneapolis-based nonprofit PRG, said prospective buyers who meet with PRG advisors are asked to begin the process by creating a budget. The nonprofit also connects would-be buyers with resources that help provide assistance with down payment/closing costs.

Wills offers the following considerations for those considering their options.

  • Seek advice as to whether it makes sense to purchase from someone who is not in a position to financially benefit from the consequences of that decision. I suggest discussing the situation with a counselor.
  • Ultimately, the decision is highly dependent on the buyer’s individual circumstances. Not everyone has the financial means to buy a home, but buying a property they can afford with a fixed-rate mortgage can give buyers more control over their housing costs over the long term.

Wills said that despite rising interest rates, homeownership is still the primary way most Americans build wealth, and he encourages people to buy if they can.

“Given our dire BIPOC homeownership disparity, it’s no wonder that families of color in the Twin Cities have a fraction of the wealth enjoyed by white families.” Now) the best time to buy a house is when you can afford it.”

help make tiring decisions

The rent vs buy calculator is a great help in understanding the financial impact.one of us favorite calculator Created by The New York Times. There are many others. “Should I buy a house or keep renting?” Fidelity Investments worksheet. The site includes a list of five questions you should ask before buying, but also includes links to rent and purchase calculators.

If you want to talk to someone about your situation, the Twin Cities have many options including: PRG Co., Ltd. A local non-profit organization that offers HUD-certified counselor and homebuyer classes. You can contact them at 612-721-7556.of Minnesota Homeownership Center A one-stop shop for statewide information, resources, classes and counseling. The phone number is 651-659-9336.

JavaScript is required to complete this form.

You may also like