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Four Signs that Point to Buying (v. Renting)

While it’s undoubtedly true that choosing to buy a home here in Wisconsin – or anywhere, for that matter – or continuing to rent is a highly personal financial and life decision, it’s important to look at the numbers to help make that decision a little easier to navigate.  I also believe, as do many who work in this industry, that the majority of the important benefits of homeownership are non-financial.  Examples being freedom, space, sense of ownership and belonging, as well as many other things. The information below simply is provided as a means to help prospective buyers make the right decisions for their own personal situations.

Current homeowners: Although the title might not suggest it, there’s certainly valuable information for you in this article as well. In case you miss what is important, I clearly pull it out for you at the end!

Four Signs that Point to Buying Your Home (v. Renting)

The million dollar question these days, especially for those in those in their twenties and early thirties, is “to rent or to buy?”  For what used to be a given – that one would buy a home as soon as they could afford to do so – has become an unbearable challenge for the lot of would-be homebuyers due to the housing market’s bust and uber-slow recovery.  It’s clear that the low prices have created a wide-open window of opportunity, but those same prices have also created the concern that prices will keep falling after closing.  And that conundrum has turned hundreds of thousands of would-be homebuyers into fence-sitters.

The good news is that there are several life, mortgage and local-market signals which indicate that the time is be right to leap off the fence and into homeownership:

Market: Rents are going up.  Rental rates here in Wisconsin are on the rise – it’s a fact that the foreclosure crisis has actually created additional demand on rental housing inventory in several different ways. First, super-tight lending guidelines have stopped even some who would like to buy homes from doing so. On top of all that, former homeowners who lost homes to foreclosure now need to rent; as well, buyers in foreclosure hot spots have been hesitant to buy, many electing to stay renters far beyond when they would have otherwise. As a result, rental homes are in high demand – and rents are, in turn, rising.

The same thing applies to rent-inducement specials like “first month’s rent free” or “No heat bill for the first six months;” these promotions are mostly gone.

Life: Most folks’ income & career are stable for the foreseeable future.  The smartest homebuyers look to their lives, not just the market, for signals about when the time is right to buy. Homebuying is a long-term endeavor; gone are the days of flipping a home for a huge profit, six months after buying it.  The goal is to be able to commit to staying in the same place, geographically-speaking, for 5 to 7 years before you buy. You don’t want to be barely beginning a career in which you think you may need to move sooner than later, nor do you want to buy when you’re advanced in your career, but in an industry which is dying or downsizing the workforce in your region (unless you have a strong Plan B).

Market: Mortgage rates are going up.  Home prices have been low for the last several years. During this same timeframe, interest rates have also been low – this combination has created record-high affordability for the last four years running, causing buyers to believe that this window of opportunity won’t be closing anytime soon.

While prices don’t look like they’ll be jumping quickly anytime soon, interest rates are another story. Rates have been on a rollercoaster over the past few months, and with inflation and Fed rates set to spike later this year, today’s low interest rates might be as good as they’re going to get for a very long time.  Read “long time” as in the next few years, governmental intervention in the mortgage markets is likely to wind down, and that means higher mortgage interest rates are not only inevitable, they’ll probably be here for a very time.

See the graph below for more proof that affordability is very high, due to low prices and low mortgage rates.

Life: You can reasonably predict the home you’ll need in the years to come.  Since successful homeownership requires that you be ready to be in the place for a good number of years, best practice is not just to buy a home with the space and number of rooms you need right now – rather, you should aim to buy the home you’ll need 5, 7 or even 10 years from now.  Of course you cannot predict the future with 100% certainty, but you can reasonably predict it.  Whether you’re a newlywed with no kids now, but you plan to have them in a few years, or you’re a brand new empty-nester – but can project that you’ll want to retire and not want to climb two flights of stairs to get to and from your bedroom – 10 years down the road, you can decide now. Before you buy, with a little bit of forethought, you should be ready to buy the home that meets your future needs.

What about those that already own a home? As noted above, today’s low rates will not be around forever, it might be a great time for you to look into refinancing or upgrading to a bigger, yet still very affordable, home.

Of course, buying a home is a huge decision that includes many long-term financial and lifestyle obligations. With the data above and a serious thought process in place, you might be inclined to take the next step down that path to homeownership. Please call me at 262-293-5144 or contact me using any of the other methods noted here; I would love to answer your questions and get started on the process toward seeing what you can be pre-approved for – it’s completely free to get started!

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