Rent Versus Buy--A Tool to do the Math!

Buy or Rent? It is a fantastic question and one often asked by first time home buyers. It also creates a lot of discussion and sometimes debate. So why is this such a tough question to answer? Because there are many variables that will define the home purchase investment. The biggest is location which can often determine the price of a home. In some areas like in the Minneapolis/St. Paul metro where we are blessed with very affordable real estate, an entry level home can be purchased for roughly $150,000 to $200,000 but in other large metropolitan areas, starter homes can be double this amount. This makes it more attractive, and affordable to rent. 

But even in an area where homes are affordable, other several other factors do come into play. Taxes, insurance costs, maintenance, utilities, mortgage rates and how long you plan to stay in the home are a few of the things that need to be added into the rent versus buy equation.  This might seem to be an impossible calculation  but there is a great tool available online. Check out the NY Times Rent VS Buy Calculator. It is an interactive tool where you adjust the graphs to what is happening in your market, your life and your future. The tool calculates where the breakeven rent versus buy point would be for you. It is very helpful no matter where you live. 



Copyright 2014 www.terieckholm.com

Should I Buy or Rent a Home in 2014?

January is a time for making resolutions, decisions and taking stock of one's life. It is a time when many resolve to make a change for the better or their future. It is no wonder there is an uptick in real estate activity the first week of any new year. Finances are one of the things many resolve to put in order and since housing expense is one of the biggest part of any budget, it follows suit that many consider the age old question, "Is it better to buy or rent a home?"

Why should anyone consider buying a home? It is hard to tell whether the economy is good, bad, improving or declining these days. Some media reports say things are improving while other indicate the immediate future is not so rosy. One statistic I recently read in REALTOR Magazine can put things into perspective for the individual. In an article written by Lawrence Yun he states, "On average, home owners have a median net worth of nearly $200,000 while renters are essentially living paycheck to paycheck, with only $4,000 in net worth on average". That is a HUGE difference. 

Location, Location, Location In determining whether it is best to rent or buy a home, location is a factor.  Real estate web search company Trulia, issued a full report last summer on the rent versus buy dilemma. One of the tools they shared is an interactive map of the US showing what metro areas are most affordable.Because length of time you plan to live in a home and tax bracket are key to the equation, these variables are included. The Minneapolis/St Paul metro area is a good place to buy in many circumstances. And, in my opinion based on the average price per square foot, buyers considering a purchase in the very affordable north & east metro, might consider it an excellent opportunity.
By the Numbers If indicators are good geographically, that provides only part of the answer. To determine whether to buying a home is the best option, price of the home, taxes and interest rate on the mortgage need to be considered. Another very helpful tool is a Rent Versus Buy calculator  It is simple to use: Enter your current rent, the price of the home you are considering, and a few other details to receive a detailed report. The calculator will provide an indication of where you will stand financially 6 years after purchasing a home if you have to sell. An interesting feature of the tool is the sliding scale that allows you to adjust the estimated property value increase (or decrease). 


 

Copyright 2014 www.terieckholm.com

Rent or Buy? The Debate Continues…But in Minnesota, Buying is #1!

Earlier this month the real estate web search company Trulia announced a new rent versus buy index. Topping the list of places to buy rather than rent was the Minneapolis market (yes, this means all of the Twin Cities metro). Trulia made the calculation using the listings on Trulia.com comparing the average rent of a 2 bedroom home or condo compared to cost the list price of a similar sized home. Results show that in this market people may come out ahead if they buy rather than rent.

Now combine that information with the first quarter numbers just released from the National Association of REALTORS® showing that the prices in Minneapolis/St. Paul are still down. In the just released First Quarter Local Market Report for Minneapolis/St. Paul/ Bloomington the trends for the market indicate that nearly all of the equity from the housing boom has been wiped out. Today’s homebuyer has the ability to buy a home at a price not seen since the late 90’s. This IS a huge opportunity for anyone STILL on the fence about buying a Minnesota home.

Should you rent or buy?

There is an awesome website that helps individuals to answer that question. Ginnie Mae is an organization providing that provides the private mortgage insurance to most government (FHA and VA) loans. Their website provides tips, tools and ideas to help out the first time buyer.One helpful tool is their Rent versus Buy Calculator. It is simple to use: Enter your current rent, the price of the home you are considering, how long you intend to stay at the home and a few other details. The calculator will provide an indication of where you will stand financially if you make the purchase. It is a good tool because it allows you to adjust the estimated property value increase. (In this changed market, it would be best to consider a 0-1% increase. Or consult with a REALTOR® for an estimate for a particular region or neighborhood.)

Copyright 2010 Teri Eckholm