Is it a Good Time to Rent?

[Brady Mullen]

It's nearly unbelievable to me when renters say it's not a good time to buy. I want to ask them if they're trying to tell me it's a good time to rent? Cost of goods and services always trickles down to the consumer.

If you think housing is expensive, you don't avoid that because you're renting - you just don't get the equity you're paying for - you're buying it for someone else!

Of course, everyone here probably agrees with this already, but the challenge is how do we help people in our communities understand this for what it is?!

The fact that our children graduate high school having no clue how this works but can probably write out the quadratic equation is mind-boggling.

[Kenny Smith]

@Brady Mullen

Great question!  As I tell all my clients, you have to look at the facts and the data of what is going on in the market and based off of that, make your best educated guess of what could happen if you wait to buy and keep renting.

First off, interest rates. We have seen rates continue to increase, with rates hitting a 23 year high last week at a national average of 7.49% for a 30 year fixed mortgage.  With all that said, now is a great time to buy. Think about it like this, if you are on the sideline waiting for rates to drop, so is everyone else. There is insane pent up demand right now, and when rates drop, everyone is going to get back into the market, and home prices will sky rocket again. Especially with inventory going to continue to be a problem in the coming years.

Regardless of the rate, prices have kept going up or stabilizing because we are dealing with such low inventory. This is not good for both buyers and sellers. Buyers in the fact their monthly mortgage will go up tremendously, but also sellers for those who want to trade up, don't want to because they become a buyer in this market. Also, if they bought or refinanced during COVID, they likely have a very low rate they don't want to give up. For those reasons, sellers are holding onto their homes until rates go below a certain percent. Who knows what that number is, maybe between 5-6%?

If the rates keep going up, it is actually a good thing for investors and buyers. This will scare a lot of buyers out of the market and they will wait to buy. Those that are savvy will get into the market, negotiate a lower price on a home (especially in the offseason), and refinance the mortgage/rate if and when rates drop.

You can also negotiate into an offer what is called a temporary rate buy down paid by the seller. That can help alleviate short term interest rates buying you time until they drop and you refinance permanently.

Lastly, if demand isn't at an all-time high right now, we have a record number of early to mid 30's in the US right now.  Back in 1990, we saw the birth rate here in the US skyrocket in comparison to previous years and following years.  The average age of your first time homebuyer here in the US is 34-36.  All of these buyers have or will enter the market in the coming years pushing demand even higher.

Waiting to buy is only going to cost you more and more the longer you wait.  Hope this gives you some ammo!