Confused? Of course you are, if you’re a potential buyer. We are living through a very dysfunctional housing market and the maze doesn’t look like it’s ending any time soon. Should you buy, should you rent or should you find a tiny accessory home? The answer is different for everyone.
Buying has almost always been favored over renting when it comes to housing. For some, renting is considered “throwing money away” while buying is an “investment.” The truth is the answer is much more nuanced and really depends on what is the right fit for you.
Renting is a short-term solution as opposed to homeownership, which is much more of a commitment in terms of finances, time and labor than renting. Nevertheless, the argument for home ownership has always been building equity and doing as you please with your property.
In today’s real estate world, homeownership is very elusive to first-time buyers. Inventory is in short supply, interest rates are rising and particularly in Florida, insurance is totally unpredictable from one renewal to the next. Right now, the cost of buying a home versus renting one is at the most extreme since at least 1996. The average monthly new mortgage payment is 52% higher than the average apartment rent, according to CBRE, a global commercial real estate services company.
A person buying a home today will pay 60% more for monthly repayment costs than if they had bought the same house three years ago. As a comparison, rents rose by 22% over the same period, a little ahead of the inflation rate but far below the cost of purchasing on a monthly basis.
If the home you’re considering buying is a long-term investment and you can scrape up the monthly costs with a little extra for inevitable repairs, then in the long run you’re better off. But this decision is an individual one based on job security, family needs and the desire to grow equity.
Trying to fill the lack of the affordable property gap are tiny homes or ADUs (accessory dwelling units). These are typically small apartments tucked away in the backyard, over garages or extended out from the main house. They are getting a second look from buyers who are building, and contractors are providing options for these units as part of new construction. This is a growing trend to keep an eye on.
Finally, I feel that in the best interest of homebuyers, I must mention this last item. Realtors – specifically The National Association of Realtors (NAR) – are facing two federal antitrust trials relative to commissions charged. Realtor commissions are typically 6% shared between the listing and the selling agents, creating a potential conflict of interest. Keep in mind this is not set in stone and sellers can ask for a lower rate before they enter into a listing contract.
The first of these two antitrust cases was decided by a jury against the NAR on Oct. 31. The decision will be appealed, and it could take years before there is any final conclusion. The second case has not gone to trial yet, but we can assume there will be more antitrust cases going forward.
This ruling and others that may be coming can possibly change the way business is done in the real estate community. I know how hard most real estate professionals work and how much experience they offer their clients; therefore, I’m staying neutral.
Well, if you were confused before, I just made it a little more confusing. However, renting or buying should not be confusing, it should be well thought out before moving forward.
