In an important commentary on the state of the real estate market, CNN Money released a story based on the Winter 2012 Rents Vs. Buy Index stating that in 98 of the top 100 housing markets it is more affordable to buy a home than rent. However, many potential buyers still aren’t looking at the big picture: today’s current interest rates and the vast improvement to total net worth.
“It’s not difficult to get a home loan. If you have the income and you can prove that you will pay back your debts, all you need is 3.5 percent down,” said Steve DiMarco, president of Key Mortgage. “However, interest rates on home loans are going up. It’s time to get over your fears because even if home prices don’t rise – and they will – your cost to borrow money is increasing.”
Many experts agree that buyers should examine the cost of purchasing a home more than the price of the home. The mortgage rate to finance a purchase can have a dramatic impact on the overall cost, and recently more people are talking about the possibility that mortgage rates could begin to increase.
The table below shows that even if the price of a home softens, the cost of a home could increase:
According to Dean Rouso, Baird & Warner’s director of sales development, potential buyers should look at their payment or monthly cost of occupancy.
“The advantages to owning a home have jumped dramatically, and now is the time to act,” said Rouso. “Not only is the price right, but now clients can start thinking about how property ownership can vastly increase your net worth.”
In the past 12 years, the net worth of the typical homeowner has ranged between 31 and 46 times that of the net worth of the typical renter. According to the National Association of REALTORS®, despite declines in equity and housing markets, homeowners have a net worth greater than renters.