Should I buy or rent?
5 Reasons why home ownership is a Good Financial Investment
The percentage of income needed to afford a median rent historically was 25.8%. Right now, we're over 29%. It's much higher than historic numbers, but if we take a look at buying, the percentage of income needed to afford a median-priced home, historically that number is about 21%. Right now, we're still down at 15.8%, well below historic numbers. So, the percentage of income that a family needs right now is less than historically was the case. Part of the reason for that is the 30-year fixed rate from Freddie Mac. We can see this going all the way back for the last several decades. We can see we're lower now than we have been in a long time - ever really since they recorded it. And what that's done, it's caused more and more renters who are seeing their rent increase and seeing that in most communities they can go ahead and buy that first-time home and spend less money than they would on rent. We're seeing more and more renters turning into shoppers for a home. As a matter of fact, here's a report from TransUnion showing that the share of renter home shoppers - people who are shopping for a home right now that are currently renters - has gone up from 45% in the first quarter of 2015 to 50% in the first quarter of last year, and up to 55% in the first quarter of this year (2017). So, the renters are out there shopping right now looking for a home, and between mortgage availability getting easier and interest rates staying low, the affordability of that home is creating more home ownership.
- Mortgage payments can be fixed while rents go up.
- Equity in your home can be a financial resource later.
- You can build wealth without paying capital gains.
- A mortgage can act as a forced savings account.
- Overall, home owners can enjoy greater wealth growth than renters.
The percentage of income needed to afford a median rent historically was 25.8%. Right now, we're over 29%. It's much higher than historic numbers, but if we take a look at buying, the percentage of income needed to afford a median-priced home, historically that number is about 21%. Right now, we're still down at 15.8%, well below historic numbers. So, the percentage of income that a family needs right now is less than historically was the case. Part of the reason for that is the 30-year fixed rate from Freddie Mac. We can see this going all the way back for the last several decades. We can see we're lower now than we have been in a long time - ever really since they recorded it. And what that's done, it's caused more and more renters who are seeing their rent increase and seeing that in most communities they can go ahead and buy that first-time home and spend less money than they would on rent. We're seeing more and more renters turning into shoppers for a home. As a matter of fact, here's a report from TransUnion showing that the share of renter home shoppers - people who are shopping for a home right now that are currently renters - has gone up from 45% in the first quarter of 2015 to 50% in the first quarter of last year, and up to 55% in the first quarter of this year (2017). So, the renters are out there shopping right now looking for a home, and between mortgage availability getting easier and interest rates staying low, the affordability of that home is creating more home ownership.
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