Housing prices are astronomical here but so is rent. It seems I am throwing money down the drain every month. Would it be a mistake to buy so I could at least build some equity?
Buy Now or Wait?
Dear Buy Now or Wait,
This year’s real estate market has been crazy! Housing shortages in parts of the country and lumber scarcity pushed prices beyond historic records. Bidding wars are common with all-cash bids and higher down payments, even for houses that have not been seen in person. My son sold his home in Nashville to someone who never stepped foot in the house—only to then receive a back up offer for 10% greater than he was in contract for!
Bankrate surveyed 1,400 homeowners, revealing that 64% of millennials (ages 25-40) regretted buying their homes. The main reasons? Cost of maintenance and overpaying for the house. Many first-time home buyers joined the buying frenzy and paid beyond market value in an effort to avoid missing out. Those who lost several offers compromised their budgets in order to win, move, and get settled. Millennials were more likely to buy fixer-uppers than new homes and borrow to make improvements. Reality hit after closing and pricing out the renovations for their instagram worthy dream home.
The pandemic is partly to blame. Travel restrictions and social distancing guidelines made visiting houses prior to purchasing difficult. While more millennial homebuyers regretted their purchases, 33% of baby boomers (ages 57-75) did as well. Lack of experience and FOMO (fear of missing out) may have affected the younger buyers more than the older ones.
Key findings among surveyed buyers:
Advantages of Renting
A growing housing trend is “renting by choice.” This means that although a potential homebuyer is financially qualified to own a home, they choose rather to rent. They cite some advantages: the apartment is “maintenance free” if anything goes wrong, no real estate taxes, the ability to “lock and leave” if they want to do extensive travel, and a greater sense of freedom should they experience a job change or prefer to live in a different part of the country working remotely. Many developers are catering to this market by loading multi-family units with attractive amenities for the discerning tenant. All that to say, renting is not throwing money down the drain. You get a nice place to live and lots of flexibility and freedom for your costs.
If You Decide to Buy
Take time to see the home in person, or work with an experienced friend or agent to avoid the disappointment in location, layout, or size of a home. Study housing comps and research the schools, crime statistics, flight patterns, industry trends, traffic patterns, and homeowner association issues (HOA) to make an informed decision. The condition of a home, cost of utilities, property taxes, HOA fees, and other factors can prepare potential buyers for known costs. Home ownership comes with unforeseen repairs and maintenance, which is why an emergency fund is crucial. A budget is a useful tool to plan for a purchase and think beyond just the selling price of a home.
To know if you are financially prepared to buy a home, answer these questions:
Scammers are becoming more proficient in duping the innocent during this hot market. RealHomes.com and Bankrate.com list some of the common ripoffs in real estate transactions such as loan flipping, foreclosure relief, and moving scams.
Without knowing how you respond to the questions I posed above, I cannot say whether you should continue renting or buy now. I hope I have given you enough information to make a good decision. Let us know how we can help. We have plenty of free resources and calculators at crown.org.
This article was originally published on The Christian Post on July 16, 2021.
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