Furthermore, baby boomers are confronted with the same question for varied reasons that include a newfound desire to be mobile and investing in a market that is appreciating from the aftermath of the recent housing bubble.
Real estate agents well-versed on the variables that determine whether a client should pursue homeownership instead of a lease, are positively guiding people through this major life decision.
So posed with the question of whether to buy or rent, what is the answer?
If you do the math, buying in booming markets such as San Francisco, New York, Boston, Los Angeles and my hometown of Denver becomes less expensive than renting over time; plus, with property values rising, it is generally favorable to purchase a home as a long-term investment.
“Renters who want to become buyers hear the buzz that there is a frenzy in the real estate marketplace with multiple offers, over list price and low inventory, so they are nervous to enter into the homebuying market, and they are sticking to renting,” said Denver-area Realtor Brigette Modglin.
“However, there are some renters who are ready to jump into homeownership as they love the lifestyle of markets like Denver and see all the benefits they have to offer. In these cases, prospective homebuyers are getting their cash or financing together and jumping into the market.”
Explaining the benefits of homeownership
Modglin offers other real estate agents the following advice to help them explain the benefits of buying versus renting:
- A mortgage can sometimes be less expensive than rent. It all depends on the type of property: condos and town homes typically have HOA dues that can add to your overall holding costs.
- Homeowners build equity year over year. We have seen home appreciation up in the metro Denver areas and more homeowners have been building a good amount of equity.
- Homeowners are building your net worth and a financial portfolio.
- There are some cases where the property you purchase may allow for a housing share option such as Airbnb or VRBO, which can help you to pay off your mortgage more quickly (city and county fees may apply).
With more apartment units being delivered in Denver (similarly to other major U.S. markets), Modglin said, “Rising rental rates are impacting Denver’s housing industry at large since the cost may push more renters to homeownership. Furthermore, renters who are living in the city may have to move to the suburbs, which could push them to buy versus rent.”
Notably, Modglin comments that these factors may not apply to all markets with upward price trends like Baltimore, Newark and Salt Lake City because, for example, property taxes may not make it more affordable in a market like Newark, New Jersey.
Buying isn’t for everyone
The bottom line is homeownership has substantial long-term benefits, but it’s not the right decision for every scenario. Key takeaways for real estate agents to help navigate their clients through the decision-making process of whether to buy versus rent include:
- Understand the variables in your local market that make for good conditions to purchase a home, such as home price appreciation trends
- Explore all financing options in advance of house hunting
- Get deeper financial and lifestyle insights from a client to better determine what makes the most sense in their unique situation by asking pointed questions like:
- How long do you think you will stay in your home?
- Are things tight after you pay your monthly bills, or are you on a fairly flexible budget?
- Are you willing to put in the extra maintenance required of a home?
- Do you want to settle down or are you looking for a pick-up-and-go lifestyle?
Have you noticed an impact on the housing market due to rental price increases? Comment below, and share your perspective.
Ann Turner is the chief executive officer at the Denver Metro Association of Realtors (DMAR). You can follow DMAR on Twitter at @DMARealtors.