Metairie first-time home buyers in 2014 are faced with a
question that hasn’t changed for generations: is it more practical to buy right
now, or to continue to rent?
Over the past few years,
buying has been the easy choice. Nationally, in 2013 it cost 35% less to own a
home than to rent according to that year’s study by real estate website Trulia.
That despite rising house prices and mortgage rates. But that was last year, and the experts have been pretty
unanimous in predicting that interest rates will continue to rise—ending up
somewhere near 5.5% by 2014’s end (per the National Association of REALTORS®).
In the face of higher
interest rates and house price tags, will 2014 be the year when renting becomes
more affordable than buying?
While first-time home buyers in
Metairie are faced with increasing house
prices and mortgage rates, renters also find another national trend: higher
rents. Rents have been on the rise for the past few years, with continued
increases expected throughout 2014. According to Axiometrics, the folks with
the latest data, apartment rents are on course to rise by 3.04% in 2014. Research
firm Reis puts the expected rise at 3.15%— and both say the causes are the
potent combination of tight supply and rising demand. Whenever the economy
improves, each incremental gain puts even more pressure on rents—which acts as
an offset to any financial benefits of renting versus owning.
Where does that leave our
typical Metairie first-time home buyers? Most recently, national averages show
it is still about 21% cheaper to own rather than rent. According to the Trulia
study, by fall of last year, the earliest tipping point at which it would have become
more expensive to own rather than rent would have been expected to occur if
interest rates hit 5.2%—but only in San Jose, California—and only if rents had
remained fixed (which didn’t happen, even in San Jose). Nationally, out here in
the real world, Tulia admitted “mortgage rates will not tip the housing market
in favor of renting over buying until rates hit 10.5%...”
Metairie first-time home
buyers can be a bit more confident as they take in one more piece of
information from the real world of April 2014 (no matter what the experts
predicted): over the past few weeks, national mortgage interest rates have been
edging down instead of rising! That may well change direction again (probably
will), but for now at least, I have to say that it’s a pretty clear call in the
spring of 2014: time to get pre-qualified!
That’s the first-time home
buyers’ Step One…it also happens to be an ideal time to give me a call!
Terez Harris NOLA Real Estate Group
(504)297-2619
Harris.Terez@gmail.com
Keller Williams Realty New Orleans 8601 Leake Ave. New Orleans, LA 70118 504-862-0100
Each office independently owned and operated. All brokers licensed in the state of Louisiana.
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