Home prices are affordable, mortgage rates are low, options are plentiful, and now there’s another reason for buyers to make the leap into home ownership: rent is on the rise. New data across the country shows that rental costs have been steadily increasing over the past few years.
A new housing report from Hotpads.com has found that two-bedroom rental prices in 20 of the largest metro areas have increased 3.75 percent in 2011. Studio rentals have seen the highest increase at 7.12 percent over the past year. Prices are expected to continue to rise in 2012.
After five years of falling prices and surging foreclosures, it’s hard to know what will happen next. But many economists would agree that it’s likely that the rate of decrease in home values since 2006 is now leveling off. Obviously, it will take many years until we start seeing significant appreciation. But let’s look at it as simple economics: the demand for rental properties is high, and supply is low. The demand to buy homes has been low, while there are tons of choices in the market right now.
There really hasn’t been a better time to own a home. As CNN Money points out:
“…a new study by Deutsche Bank measures affordability in two ways: first, the share of income Americans are paying to own a home. And second, the cost of owning vs. renting. On the first metric, the analysis finds that homeowners now pay just 9.8% of their income in after-tax mortgage, tax, and insurance payments. That’s down from 17.2% at the bubble’s peak in 2007, and by far the lowest number in the Deutsche Bank database, going back to 1999. The second measure, the cost of owning compared with renting, should also inspire potential buyers. In 28 out of 54 major markets, it’s now cheaper to pay a mortgage and other major costs than to rent the same house. What’s most compelling is that in all of the distressed markets, owning now wins by a wide margin — a stunning reversal from four years ago. It now costs 34% less than renting in Atlanta. In Miami the average rent is now $1,031 a month, vs. the $856 it costs to carry a ranch house or stucco cottage as an owner.”