Is now a good time to buy or rent a house? While it depends on your market, overall, the financial rewards of investing in real estate outweigh renting. Here's a look at why more people are deciding to buy vs. rent in 2015.
Home prices were driven higher in the first quarter of 2015 as existing-home sales rose. Regional statistics show that in the Midwest, prices have risen nearly 10 percent compared with a year ago. In the South, prices climbed more than 9 percent and in the West they rose 8 percent. This is good news for current homeowners, but could be disconcerting for buyers.
Although interest rates are still low, they are expected to rise eventually, but exactly when, no one knows. When that happens, if home prices continue to rise, affordability might be an issue for buyers. For this reason, buyers who can afford to make a purchase should do so now.
Aha: More Economically Beneficial to Buy vs. Rent
Realtytrac released a report for the first quarter of 2015 that shows that the monthly payment on a median-priced home is more affordable than the monthly fair market rent on a three-bedroom property in 76 percent of the U.S. counties included in its analysis.
So, why are people still renting when it is cheaper to buy in more than half of the country?
Many would-be-buyers are still climbing their way out from unprecedented student loan debt. Because of this burden, many are unable to save up the necessary down payment. Additionally, with wages remaining relatively stagnant, home price gains are outpacing wages. This is forcing buyers to purchase outside city limits where prices are generally more affordable.
Most Affordable Areas to Buy a Home
According to the Realtytrac study, of the areas examined, the following five counties ranked the highest in affordability:
Bay County, Mich. (11 percent of median income required to afford a median priced-home)
Fayette County, Penn. (11 percent)
Beaver County, Penn. (14 percent)
Tazewell County, Ill. (14 percent)
Butler County, Ohio (14 percent)
On the contrary, according to realtor.com, the least affordable markets include San Francisco, San Diego and Los Angeles, Calif. As well as Miami, Fla. and New York, N.Y.
To find out how affordable your market is, look at the median income and the mortgage-to-income ratio in your area. This data can be obtained by local government and chamber of commerce sites.
This is the fourth article in the series for Q1 2015