To Rent Or To Buy

To Rent Or to Buy...that is the question.

Allow me to answer.

Mortgage Interest Rates have been on the rise for the last 8 weeks.  During this time we have seen some of the largest short-term increases in a history.  However, IT IS STILL A GREAT TIME TO BUY A HOUSE!  Yes, I am screaming this…because I believe it.  Here’s why:

When the housing market contracted in 2007 many people lost their homes.  Due to this and to caution on many peoples part, a lot of consumers are either unwilling or unable to buy a house right now.  The result is that the demand for rentals has exploded.

As I look around the north side of Indianapolis and other cities I have traveled to in the last 6 months, I see a ton of apartment buildings going up.  Additionally, I know from talking with my Realtors that there are a lot of investors buying up houses right now to turn into rentals.

The result is that Rental Rates have increased well beyond what monthly mortgage payments would be.  Check this out-

In a slide titled "The After Math Of The Housing Bubble," JP Morgan Funds' David Kelly offers a chart of monthly rent versus monthly mortgage payments to capture an imbalance in the housing market.  Here's the chart illustrating the evolving trends:

  Census Bureau, J.P. Morgan Asset Management. Monthly mortgage payment assumes a 20% down payment at prevailing 30-year fixed-rate mortgage rates; analysis based on median asking rent and median mortgage payment based on asking price.

Do the math, if you are renting you are paying a premium, and you are creating wealth for someone else.  If you can buy, it is still a great time to do so.  Rates are higher than 3 months ago, but they are still historically low.

IT IS A GREAT TIME TO BUY A HOUSE.