In 2021 the average rent increase for apartments, duplexes and single-family dwellings was a whopping 14% and even double or more than that amount in the hottest markets…Austin, Texas went up a jaw dropping 40%. Prior to that, from 2017-2019, the average rent increase hovered around 3.4%. Unfortunately, industry professionals say we should prepare for this new normal in the rental market as rents don’t appear to be dropping anytime soon, with some experts speculating a 10% average increase in 2022.
The housing market has partially fueled this rise. Inventories for both new and resale homes remain low while at the same time prices continue to rise much more swiftly than in previous years. Also mortgage interest rates are slowly creeping up thereby pushing some would be homebuyers out of the market. And those that are pushed out of the housing market are forced into the rental market. Unfortunately for them, property owners are taking advantage of the
system and charging for maximum profit due to simple supply/demand economics.
As a buyer’s agent, I recognize inventory is tight but I also know patience, an ability to act quickly and the willingness to put in a solid offer will ultimately translate into our client being under contract on a great home…so the lack of inventory should not be the primary dissuader. And although interest rates are rising, they are still at historical lows.
Therefore I always ask the question to someone who is looking to rent, why are you not purchasing a home instead?
9 times out of 10 it’s due to finances…lack of a down payment and money for closing costs (averaging 3% of the loan amount). On occasion, it may truly be the case that the time just isn’t right for someone due to this reason. But not always…
There are still some loan options that allow for zero down or down payment assistance such as VA loans (for active military or veterans only), USDA loans (for rural areas) and FHA loans (most commonly used for those with lower credit ratings or first-time homebuyers). All of these loans are insured by the government so lenders feel more confident in approving buyers that may need assistance.
If you qualify for down payment assistance with one of these loans, this can increase your buying budget or just give you more of a financial cushion so you don’t drain your savings buying a house. Plus these are not just for first time homebuyers, they don’t require perfect credit and there is a wide range of loan amount limits.
If you move forward in purchasing a home as opposed to renting, you are engaging in the most robust, tried and true wealth building method most people will ever have in this country…building equity through home ownership. So now instead of anticipating a rent increase of 10% in a year’s time, you can anticipate your home’s value appreciating by 10% (or more) in a year’s time.
I would love to help you determine if now is the time to move out of that tiny, crazy expensive, vanilla apartment where you can hear your neighbors walking and talking. Or maybe you’re in a single-family residential rental and your landlord doesn’t care about your months long rodent infestation (true story…and contracts so highly favor the landlord that you are completely at their mercy).
Bottom line, don’t assume you can’t buy a home until you investigate all your options. You may be pleasantly surprised at the outcome.
By Holly A. Morris, Realtor
The Meridian Real Estate Group