Still a Better Option to Buy Than Rent in 2013
One year ago, we delved into an age-old debate: is it better to buy or rent when looking for a new place to call home? In fall 2012, Atlanta had a low median home sale price compared to the rest of the U.S. and national mortgage rates were at historic lows. It was concluded that it was an optimal time to buy a home in Atlanta.
A year later, we decided to dive back into the debate as Atlanta’s residential real estate market has changed dramatically in the past year. In the past 12 months, Atlanta has experienced a myriad of housing trends from a housing inventory crunch, climbing home sales, falling foreclosure rates and rising mortgage rates.
According to Forbes, the buying versus renting gap is becoming narrower across the nation, largely in part to rising rates. Mortgage rates can be an important factor in deciding to purchase or rent a home. The 30-year fixed rate is now 4.80 percent compared to 3.75 percent a year ago, according to Trulia. Home prices have also been on the upswing in 2013. From April 2012 to April 2013, home prices rose 12 percent. Due to the rise in rates, buying a home is 35 percent cheaper than renting today, compared to last year when it was 45 percent cheaper to buy than rent
Many people are surprised to find out that even though home prices and mortgage rates are increasing, it is still less expensive to buy than rent. Both factors, home prices and mortgage rates, are rising from historically low levels and are still below long-term normal levels.
“At today’s house prices and income levels, mortgage rates would have to be nearly 7 percent before the typically priced home would be unaffordable for most families making a typical income,” said a Freddie Mac statement.
However, the rising rates are causing some cities in the largest 100 metro areas, such as San Francisco and San Jose, to begin tipping in the other direction where renting is a better option. For example, the median home price in San Francisco is more than triple the national level. A few more years may prove that it is more economically savvy to rent in these locations than to buy.
A year later, it is determined that it is still in the consumer’s best interest to buy rather than to rent. MSNBC recently named Atlanta as the number 3 city to “quit renting and buy a home.”
Southeast Mortgage offers a number of calculators to help you decide the best direction for you based on your financial situation. Check out the Rent versus Own Calculator to help determine which option is best for you.