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Don’t Get Caught in the Rental Trap!

By
Real Estate Agent with RE/MAX All Pro 475.102921

Rental Trap

There are many benefits to homeownership. One of the top ones is being able to protect yourself from rising rents and lock in your housing cost for the life of your mortgage.

Don’t Become Trapped

Jonathan Smoke, Chief Economist at realtor.com, reported on what he calls a“Rental Affordability Crisis.” He warns that,

“Low rental vacancies and a lack of new rental construction are pushing up rents, and we expect that they’ll outpace home price appreciation in the year ahead.”

In the Joint Center for Housing Studies at Harvard University's 2015 Report on Rental Housing, they reported that 49% of rental households are cost-burdened, meaning they spend more than 30% of their income on housing. These households struggle to save for a rainy day and pay other bills, such as food and healthcare.

It’s Cheaper to Buy Than Rent

In Smoke’s article, he went on to say,

“Housing is central to the health and well-being of our country and our local communities. In addition, this (rental affordability) crisis threatens the future value of owned housing, as the burdensome level of rents will trap more aspiring owners into a vicious financial cycle in which they cannot save and build a solid credit record to eventually buy a home.”

 “While more than 85% of markets have burdensome rents today, it’s perplexing that in more than 75% of the counties across the country, it is actually cheaper to buy than rent a home. So why aren’t those unhappy renters choosing to buy?”

Know Your Options

Perhaps you have already saved enough to buy your first home. HousingWirereported that analysts at Nomura believe:

"It’s not that Millennials and other potential homebuyers aren’t qualified in terms of their credit scores or in how much they have saved for their down payment.

 It’s that they think they’re not qualified or they thinkthat they don’t have a big enough down payment.” (emphasis added)

Many first-time homebuyers who believe that they need a large down payment may be holding themselves back from their dream home. As we have reported before, in many areas of the country, a first-time home buyer can save for a 3% down payment in less than two years. You may have already saved enough!

Bottom Line

Don’t get caught in the trap so many renters are currently in. If you are ready and willing to buy a home, find out if you are able. Let’s get together to determine if you could qualify for a mortgage now!

This article was originally published on Monday, August 29, 2016 at Simplifying The Market.

Posted by

Matt Kombrink Broker, CDPE, SFR
RE/MAX All Pro
St Charles, Illinois
(630) 488-3300

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Comments (2)

Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

Matt, great advice!   Our rental prices are sky high right now, and does not allow the tenant to save any money for their down payment.   It is a definitely a trap.

Sep 01, 2016 01:09 AM
Matt Kombrink
RE/MAX All Pro - Saint Charles, IL
Your #1 Source For Real Estate

True.  Unless you're looking to live somewhere short term, renting just doesn't make sense.

Sep 01, 2016 01:10 AM