Buying vs. Renting: U.S. Real Estate in 2019

 

Owning one’s home is accepted as the achievement of the quintessential American dream, regardless of whether that home is a bungalow or a mansion. The track toward homeownership has many bumps and hurdles, however, and not everyone makes it to the finish line. In 2019 fewer and fewer Americans will realize the dream and will resign themselves to spending hard-earned cash on rent payments for properties they do not own.

Why is this happening? Simply because home prices continue to rise while paychecks do not. In some locations, homes are selling for 6.7% more every year. A house valued at $200,000 last year will sell for $213,400 this year and $227,700 next year.

Mortgage rates are also rising. If you look at Zillow data, you see predictions of a 5.8% interest rate for 30-year mortgages by the end of 2019.  Higher interest rates boost monthly mortgage payments.

The result is home prices and monthly mortgage payments that are out of reach for the average American. A report published by ATTOM Data Solutions on the affordability of home ownership in the U.S. stated that this country is experiencing the least affordable home-price levels since 2008.

In the meantime, rental prices are not increasing at the same rate as home prices. Apartments, townhouses, and similar-type rentals are the more affordable dwelling options. The ATTOM report mentioned above found that in over half of the counties studied, a medium-sized house was more affordable to rent than to purchase.

What It Means for People Who Want to Sell Their Homes

If you are a homeowner who wants to sell, what is the impact of the current market situation?

It is a seller’s market because the inventory of U.S. homes currently for sale is at the lowest point it has been in years. At the close of 2018, only 1.55 million homes were on the market. The inventory has trended downward for the past five years, reaching a low of 1.47 million homes for sale in December 2017.

So even though the number of people in a position to buy a home is at historically low levels, it is still a good time to sell a house.

Most homeowners opt to use a realtor to help them sell their properties. The traditional route to a completed sale is listing the house on multiple platforms, hosting open houses, letting prospective buyers tour the house, receiving offers, and negotiating and signing contracts.

Some homeowners choose an alternative route to a home sale. Instead of the above realtor-aided sale process, these homeowners sell their properties directly to investors. Home buying companies such as Houston Capital Home Buyers are investors that buy homes as-is. Offers are made quickly, often accepted quickly, and the deals go to closing with ease and speed.  Traditional hoops such as inspections and repairs are bypassed.

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What It Means for Investors Who Buy Properties to Rent

This is a good time for home buyers who purchase properties as rentals. Because home ownership is out of reach for so many people, there is a demand for rental properties.

The average price of rental properties, of course, varies according to region and city. It’s not a surprise that the highest rental rates are in California, Virginia (close to Washington, D.C.), and Hawaii.

The lowest U.S. rental rates are found in Roane County, Tenn., Peoria County, Ill., McMinn County, Tenn., Green County, Ohio., and Rhea County near Dayton, Ohio, finds BiggerPockets, an online community of real estate investors.

Summing It Up

Aaron Terrazas, a Zillow senior economist, predicts a shift in the 2019 housing market compared to where it has been over the last few years.  While he sees continually rising mortgage rates and an ongoing shortage of affordable housing, at the same time he predicts a settling of the market. It is cooling, he says, in a November 2018 article in HousingWire. A stabilizing and balancing will happen between all sectors of the market (buyers, sellers, and renters) and those who can realize the American dream will have more time to make careful choices about properties that suit them best.

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