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Why It May Be Cheaper To Rent Than Buy A Home Right Now - YouTube
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[1243]
We are seeing record declines
the number of new leases falling
[1246]
23% over the last year median
rent with the largest decline in
[1250]
history. There's just a lot of
demand you know there people
[1253]
want to live in as you know they
want to live in the suburbs. Now
[1255]
they want to move out of cities.
They want bigger houses single
[1258]
family rents were
[1259]
up 5.3% in April. It's the
largest gain and nearly 15
[1263]
years, the choice between buying
or renting a home has always
[1267]
been one of the biggest
financial decisions that adults
[1269]
make. But the pandemic wreaks
havoc on the housing market,
[1273]
between home prices shooting up
by more than 13% and rents by
[1277]
more than 10% in 2021. That
decision is possibly harder than
[1281]
it's ever been.
[1282]
Conventional real estate wisdom
is that if you can afford to buy
[1286]
you should buying is a great
investment. But the inflated
[1289]
prices at the current moment may
make some potential buyers think
[1293]
twice and you may actually get
more bang for your buck if you
[1296]
wait a little bit longer until
prices mellow out and continue
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renting.
[1314]
pandemic triggered an
unprecedented seller's market in
[1318]
2019. A home typically spent 30
days on the market by May of
[1322]
2021 that had dropped to six
days. The surge in demand has
[1326]
caused inventory to drop by 30%.
And cost of a typical home rose
[1331]
to about $290,000 up more than
13% in the same time period.
[1336]
However, more recent data is
showing signs of a cooling
[1339]
housing market. In June, sales
of new homes fell 6.6% below
[1345]
May, mainly due to supply
shortages and affordability
[1348]
problems. Without a doubt the
pandemic turning the renting
[1352]
landscape upside down in the two
years prior to 2020. rents at
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the national level rose more
than 2% annually. But in 2020
[1361]
rents fell by 1.4%. The drop was
much more dramatic in some of
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the country's most expensive
cities, more than 15% in San
[1369]
Francisco and San Jose than more
than 7% in New York City in
[1372]
Washington DC. That's all
changed in 2021 apartment list
[1377]
index shows that at the national
level, overall rents are up
[1381]
10.4% just in the first half of
2021. And in April, rents for
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single family homes saw their
biggest month a month increase
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in 15 years.
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It can all feel like a bit of
whiplash. It was only six months
[1395]
ago that landlords were offering
crazy incentives, everything
[1398]
from slashing prices to offering
three to four months of free
[1402]
rent in order to fill vacant
units. But those days are over
[1406]
now. In April, a listing agent
in New York told me that this
[1409]
summer was going to be wild that
increased demand from people
[1413]
going back to the city was going
to make this one of the biggest
[1416]
rental summers ever.
[1424]
Buying a home can mean you build
equity and take advantage of tax
[1427]
incentives. On the flip side
buying is expensive. You need to
[1431]
handle a down payment closing
costs, maintenance and potential
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condo fees. A study by lending
tree shows that housing costs
[1438]
related to renting were lower
than those of homebuyers with a
[1441]
mortgage.
[1443]
What we found was that across
all of the nation's 50 largest
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metropolitan areas, renting is
considerably cheaper than
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homeownership is
[1451]
until you've paid your mortgage
off. He cost more than $600 a
[1455]
month less to rent on average.
According to the study. In
[1459]
cities like San Francisco and
New York City. The difference is
[1462]
more than $1,000.
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Here's an example that I think
can better illustrate the
[1466]
numbers. Let's say Sarah is a
young lawyer in Minneapolis
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making about $80,000 a year and
thinking about buying her first
[1474]
home. She saved almost $40,000
for her down payment. And as a
[1479]
result, her loan officer says
she can afford to buy a $240,000
[1483]
condo. She finds one she likes
not far from Viking stadium.
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It's nearly 700 square feet. But
it's an a charming old building
[1492]
and includes a parking spot and
a rooftop. She calculates that
[1496]
her mortgage payments will be
close to $1,000 about 500 less
[1501]
than an almost identical rental
unit in the building next door.
[1504]
But when you factor her property
tax bill insurance and the
[1509]
almost $600 monthly Hoa fee,
Sarah would be paying about
[1513]
19 $100 a month for housing if
she were to buy. That's nearly
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30% more than what she'd pay if
she rented next door. Not to
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mention the building with the
rental has a balcony and a pool
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while the condo doesn't.
[1527]
For me, this has really never
been a problem. I don't think of
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renting as throwing away your
money. I lived in my first New
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York City apartment for seven
years. And then I moved to a
[1538]
second one in the same
neighborhood of Astoria, Queens.
[1540]
And while it was great for us to
ride out the pandemic, we asked
[1543]
started to notice the prices
were dropping significantly, all
[1547]
over Manhattan and we figured
that now would be as good a time
[1550]
as any to try to get a deal.
[1552]
More than 10,000 apartments were
listed for rent in Manhattan in
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June of 2020. An increase of
85%. According to a report by
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Miller, Samuel and Douglas
Elliman,
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it's very rare that a couple
especially one with a dog can
[1566]
find a steal on an apartment in
Manhattan, we started to look
[1569]
around at all sorts of different
options and settled in an
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apartment that cost us $2,950 a
month, which I noticed sticker
[1577]
shock for a lot of people who
don't live in New York City, but
[1580]
it's dog friendly, has a working
fireplace and in unit washer
[1583]
dryer, which is a very big deal
here. But in a normal market,
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this apartment would probably
cost us hundreds, if not $1,000
[1591]
more than we are currently
paying. And we locked into a two
[1594]
year lease in order to really
guarantee keeping hold of the
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deal that we got during the
pandemic.
[1601]
Right now renting can be a
better deal than buying for a
[1604]
lot of people. What is more
workers returned to the office
[1607]
if interest rates start going
back up. The market could change
[1611]
we've already seen rents rising
in 2021. Take a clear eyed view
[1615]
of your finances and your five
year plan to figure out which
[1618]
choice makes the most sense for
you.
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