Renting vs. Buying a Home
Renters take notice. If you buy a house, it could pay off in as early as three years in some markets, according to a new Zillow analysis called the “break-even horizon.” The study compares the cost of renting versus buying a home over a period of time.
And from the looks of it, in select markets, buying now seems a whole lot more sensible than renting. Zillow looked into more than 200 metros and 7,500 U.S. cities. Of those, in more than 75 percent of the metros, a homeowner would break even after three years or less of buying a home.
“For a homebuyer out there, it is really tough to get a good grip on the buy-versus-rent decision,” Svenja Gudell, Zillow’s senior economist told the Los Angeles Times. She said that the analysis gives consumers “a sense for ‘Am I ready to make this decision?’”
The study takes into account factors such as down payment, rents, mortgage, property taxes etc. Of course, the rent-or-buy calculation depends on individual markets. According to the Los Angeles Times, in the Los Angeles and Orange counties, with a 20 percent down payment, it could take 4.3 years to break even. In Newport Beach it could take 14 years.
With the economic slowdown and the housing market taking an extensive beating, homeownership dwindled, triggering a demand for rentals. In many markets, rents have become more expensive than monthly mortgage payments. As rents rise, suddenly owning a home seems more affordable.
The important thing to consider before buying is your financial situation. But, if you have that figured, this could be a good time to take a plunge considering the rock bottom prices, low mortgage rates and sizeable inventory.
Home Prices Climb
Price of American homes rose 2.2 percent in May, according to the S&P/Case-Shiller Index. In the broader context, this means that the average price of a single-family home is now at the 2003 level. That’s still a 33 percent decline from the glory days of the housing boom in 2006. But, any increase is a good sign.
“We have observed two consecutive months of increasing home prices and overall improvements in monthly and annual returns,” Chairman of the index committee, David Blitzer, said. “However, we need to remember that spring and early summer are seasonally strong buying months so this trend must continue throughout the summer and into the fall.”
Like always, there are areas that are doing well, and cities that are lagging. In the New York metro area, excluding co-ops and condominiums, prices climbed 1.4 percent. But Boston, Charlotte and Detroit showed negative returns. That shows that recovery is still very localized, and it may be awhile before it becomes a nationwide phenomenon.
Construction Spending Rises
Spending on construction projects saw a 0.4 percent uptick in June, touching the highest level in almost three years.
The gain matched economists’ expectations. According to the Commerce Department, construction projects totaled $842 billion in June.
Much of that is because of the housing recovery, which has accelerated new home construction in many parts of the country. As buyers are once again betting on the economy and investing in homes, inventory is dwindling, forcing home builders to bring new products to the market. Improvement in lending rules has also helped construction companies.
“Starts and permits are up, supply is tight, there’s pent-up demand out there, credit is slowly getting better,” Gus Faucher, a senior economist at PNC Financial Services Group Inc. in Pittsburgh, said, according to Bloomberg. “There’s definitely a rebound on the residential side, there may be a rebound on the commercial side.”
According to Bloomberg, homebuilding outlays, valued at $266 billion, increased 1.3 percent. That’s the highest since January 2009.