Real Estate: Should You Buy or Rent?

01 Jun Real Estate: Should You Buy or Rent?

House of HandsHave you been wondering what’s going on with the real estate market?  After all, everything that’s happened over the last several years has been pretty incredible. The media has been blathering the slump like it’s the Titanic (sunk, not just sinking). You’ve probably even heard an expert or two tell you not to buy but to consider renting instead! (Hmm. Good luck with that.)

Okay, so now it’s Spring. This is traditionally the time when real estate begins its annual boom. People are usually thinking about buying. However, with the fluctuation of the economy, the ranting in Washington over the budget, and a teetering housing market, many would-be house hunters are wondering what to do.

Instead of being eager to get started, a lot of people are asking questions like:

  • Is the housing market at or near the bottom?
  • When will it get better?
  • Are the signs that the market is stabilizing real?
  • How’s the housing market now?
  • Should I buy or should I rent?

We had a small boom in sales when the government started cutting checks for $8,000, payable to first time home buyers once their purchase was completed. That was good for a lot of people. But that ended and sales quickly fell. That’s why the debate continues whether housing prices are near the bottom or not. However, buying a house today, in the right market, of course, will still prove to be a good investment over the long term.

Helfant-Browning, CEO, Principal Broker and Managing Partner of Coldwell Banker says, “If you’re going to pay to live in something every month, why not own it? By getting a 30-year fixed-rate mortgage, 10 years from now when the rents in the community are usually going to be substantially higher, the only thing that will change for you is your home owner’s insurance and your real estate tax.”

Who should you listen to?

While some people may be telling you that you’d be better off renting rather than buying, I can’t say that’s wise counsel. Here’s the inside scoop — think about the area where you’d consider buying, not the national average.

While some places are hard hit and showing little to no signs of recovery. Other areas ARE in recovery and experiencing appreciation.  Home prices and the prospect of appreciation vary greatly from region to region, and even from city to city. For example, a report I read recently at Moody’s Economy.com stated that home values in Minneapolis are expected to increase 21% by 2018. Prices in Austin, Texas, are projected to rise only 8%.

This proves my point to think about the area first and foremost. The housing market might come across as gloomy via the media, but many experts (including me) will tell you the financial advantages still remain.

I’ve been saying this for a couple of years now — America’s homes are tremendous investment opportunities because they’re at garage sale prices! This is a great time to buy a primary residence and invest in real estate. You won’t get better prices in the near future. The tide is turning.

What should you do?

Get qualified. Interest rates on 30-year fixed-rate mortgages are at historic lows. The national average is about 4.69 percent. That’s a good thing! Plus, there are signs that the credit markets are loosening up. Here’s what you need to qualify, according to Keith Gumbinger, vice president of mortgage information website HSH.com. “You’ll need good credit to get the best pricing… We’re talking about a FICO 740 or above for the best possible pricing.”

Work quickly. If you don’t have cash and you don’t have great credit, make those your goal.

(Sources: Money.usnews.com, TheFiscalTimes.com, Bloomberg.com, NY Times)

What do you think?

Let me know your thoughts. Are you thinking about buying or investing in real estate? How’s the market doing where you live? Are you beginning to have more confidence in the market? Will the next wave of foreclosures that’s coming scare you or do you see it as an opportunity? Talk to me.

13 Comments
  • Deb
    Posted at 16:16h, 01 June Reply

    Real estate in my area wasn’t hit as hard as most other places but appreciation rates are not on the move much yet. Looking forward to that happening!

    There still are a lot of foreclosure properties though, which might be what’s holding the market back here. This means there are quite a few excellent buys for investors in the area but employment isn’t strong enough to warrant buying unless the investor can hang on for the long term.

    I’m not an RE expert by any stretch of the imagination but I stay abreast of the market since I am a homeowner.

  • Rick Cooper
    Posted at 16:22h, 01 June Reply

    I’m glad to be a homeowner, but it’s no cakewalk. It seems like there are an endless stream of expenses to support and maintain a household. I think it’s a wise idea to anticipate and budget for future expenses.

  • Christine Stow
    Posted at 21:10h, 01 June Reply

    Loral that’s great for USA housing but I am not sure it is quite the same here in Australia. I am not sure about “30 year home loan”. Maybe it works differently over there. Here, if you want to get out of it before 30 years is up- you have to pay out the whole interest on the loan. I have seen a case where someone needed to get out of the loan and it was going to cost $80K. That is a big back breaker. For myself- we leased our IP out on a 3 year lease thinking guaranteed rent for 3 years- sweet! Due to personal circumstances, we were looking at breaking the lease after 18 months. Ooops! That would cost $20K just to get out. I agree that if you are paying rent you might as well be paying a mortgage, but longer term- you must be set up a whooooole lot different to Australia.

    • Loral Langemeier
      Posted at 19:09h, 08 June Reply

      That’s so true, Christine! Things are different all across the globe, and even in one country which makes it difficult to include every area. Thanks for sharing your insight to the AU market. Always great to hear from our friends around the world.

  • Stephen Marshall
    Posted at 16:47h, 02 June Reply

    Coming from the UK, property has a strange hold on we Brits. Last year i was lucky enough to get chatting to some estate agents ( Height of the credit crunch as they called it ) . There view on property was interesting, i hope you don’t mind me sharing.

    They said the UK has a deep rooted belief in owning your own home, almost every man is the king of his own castle so to speak, Unlike many parts of Europe where renting is the norm, even the preferred option. The Brits want nothing more than owning property. The lack of available credit to many first time buyers over the last few years has caused more people to rent, purely because the banks wouldn’t lend, not necessarily that they couldn’t afford. Predictions for the UK are that house prices are starting to recover and by 2015 average prices will be so high again that even though borrowing might be available the sheer cost of property will mean people still can’t afford.

    Seems the UK will always be a hot bed of property deals that could be done. The right place, the right time OH! and not forgetting my favourite mantra these days, the right team 😉 then i am sure there will always be deals to be had.

    • Loral Langemeier
      Posted at 19:07h, 08 June Reply

      Hey, thanks for your input on the UK market. Always welcome a local perspective and appreciate your comment. Home ownership is deeply rooted here in the States too. Great point!

  • Qualityproperties
    Posted at 02:26h, 05 June Reply

    We have been buying and selling more these past two years than ever before. this is the greatest time to purchase homes, we are using private money that allows us to return 8% interest on investors money while we make our own profit. There are ways to make money in ANY market, you have to figure out how. We do not buy for appreciation, the rental market is the best in years and there is money to be had. We love to talk to people about what we do – help enough people get what they want, and you will be able to get what you want. Today is June 4, you will see the markets get softer over the next few months, maybe even through year end. Either way, there are 30 million more people today than there was 10 years ago, but yet house prices are the same now as they were 10 years ago – quite interesting. (USA perspective only)

    • Christine Stow
      Posted at 04:07h, 05 June Reply

      Yes, I am very interested to hear how you help people – to talk to you about what you do. Maybe you can talk to my Women in Property group too?

  • Josh Agyare
    Posted at 20:34h, 07 June Reply

    I am creating multiple streams of income but real estate is one of my passions that i want to actively get involve in it. I love it, real estate.. I see a lot of opportunities there to make more money.

    • Loral Langemeier
      Posted at 19:04h, 08 June Reply

      Great Josh. Be sure to learn as much as you can before you jump in… consider getting an experienced partner the first time.

  • Rosie8west
    Posted at 23:39h, 07 June Reply

    I have been a Realtor for thirty one years and I’ve never seen such a great market for buyers before. You do not need a 750 or more FICO score, some banks are still making loans with scores as low as 600 if you go through a mortgage broker. They
    work with several lenders to get you the best rate. If you find a property that needs thirty or forty thousand dollars in repairs you can get a 203k rehab loan, where the loan is added into your mortgage payment. The 203k rehab loans are great for foreclosures and short sales. If you can afford to purchase several cheap houses and rent them until the market rebound, you will make a small fortune.

    • Loral Langemeier
      Posted at 19:03h, 08 June Reply

      Thanks for adding to the conversation Rosie. With a higher FICO score you get better rates, but you’re right, you can buy with a lower score, too. And I agree that buying houses and renting them out is an excellent way to make a small fortune today. Great points, dear.

    • Anonymous
      Posted at 00:24h, 15 June Reply

      I would like to get in touch with a good mortage broker.

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