For prospective buyers in a hot housing market, it must be a tantalizing question: Should they buy now, as prices keep rising?
Or would it be smarter to wait and see if prices fall later this year or early next year?
That’s likely a question that a growing number of renters are asking. Especially since they’re also facing higher prices to rent a home or apartment.
Nationally, median rents for houses and apartments rose year over year. And in half of the 50 largest U.S. metros, it’s getting more expensive to rent, according to the real estate site Zillow.
Rental houses, in particular, are in high demand. But there’s a limited supply of them, making rental prices more expensive.
There are simply fewer single-family homes to rent than a decade ago. When the housing market crashed in 2008, a flood of investors bought up a lot of single-family homes that had been lost to foreclosure and turned them into rentals.
Today, some renters may be wondering if it’s smart to wait a little longer for home prices to fall, then jump in.
But all evidence suggests that would be a mistake.
According to housing market analysts, it’s unlikely prices will fall. In fact, recent housing market forecasts indicate home prices nationwide will continue rising over the next 12 months.
The real estate analysts and economists at Zillow are projecting that home prices nationally will rise by around 2.6 percent through April 2018.
So any renter who thinks the price of renting a home is getting too steep should seriously consider buying now, before prices go even higher.
Why do prices keep rising?
Prices are up because demand is as well. Home values are rising due to a combination of factors, including:
• A heathy economy, with unemployment nationally at a low of 4.4 percent;
• Pent up demand among prospective buyers;
• Higher incomes;
• A solid mix of first time home buyers jumping into the market, millennials looking for a bigger home as their family grows, and Baby Boomers looking to downsize now that their kids have grown.
In fact, whenever home sales start to slow down, it isn’t because there are fewer buyers out there. It’s because of a shortage of available homes on the market. Inventory has been a major challenge all year.
That’s helping set new records in about half of the nation’s largest metros. Among the 35 largest housing markets, 15 are reporting their highest median home values ever.
One of the five housing markets forecast to outpace the nation over the next year is Tampa. Zillow expects the median price for houses in Tampa to rise by 4.5 percent now through next April.
In fact, Tampa is also one of the top destinations for millennials, according to the real estate website Realtor.com, along with Miami, Orlando, and Salt Lake City.
Central Florida is benefitting from a strong job market, low unemployment rate, affordable home prices, and a better supply of inventory than in other cities.
Zillow Chief Economist Svenja Gudell noted that home affordability is getting boosted by very low mortgage interest rates. That offers buyers the ability to keep their monthly mortgage payments within a range they can handle.
Gudell also noted that abnormally low inventory has created a competitive atmosphere for prospective buyers. And that continued competition, mixed with a limited supply, seems certain to keep pushing home values up in the months ahead.
How can buying be smarter than renting?
Anyone who wants to live in a home should seriously consider becoming a buyer. Especially since rental prices are rising as well, and competition for rental homes is just as fierce.
The 2017 Zillow Group Consumer Housing Trends Report notes that the supply of single-family rental homes hasn’t kept up with demand, which is very high.
Just as high demand and low inventory have caused home prices to rise, that combination is also driving up rents. The only exception is with multi-family apartment complexes, where rents are flat because of new construction trends.
In half of the 50 largest U.S. metros, median rents for houses is rising faster than median rent for apartments. So anyone looking to rent a house is facing high prices, limited supply and very tough competition.
At the same time, apartment living may be fine for young, single renters, but it’s less appealing to families that want multiple bedrooms, a yard and other amenities.
The Zillow study found that Generation X renters – those in the 38-52 age range — are significantly more likely to rent a single-family home than an apartment.
Thanks to low mortgage interest rates, though, home buying should be more appealing. For one thing, home values are rising quickly. That means renters who buy a home this month will see its value go up within a year.
Is it better to rent or buy a home?
Housing is a smart investment right now. Cushman & Wakefield, a global leader in commercial real estate services, just reported that there are no signs that the growth in home prices will abate anytime soon, as demand remains strong.
If you have your heart set on buying a home but wonder if renting would be more practical, definitely consider buying.
Inventory is likely to remain a challenge in many parts of the country. But that situation may be improving. New research from the real estate website Redfin indicates that the number of homes for sale fell 11 percent in July, which is the 22nd straight months of year-over-year inventory reductions.
However, there was a three-month supply of homes in July, which is up from 2.5 months in June, Redfin reported.
Today, most of the listed houses on the market are older homes – but that’s not the case everywhere. In Tampa, builders like Domain Homes are constructing brand new homes in some of the most appealing neighborhoods in the Tampa Bay area.
Domain Homes procures older houses that are run down and in some cases totally dilapidated, and replaces them with new, move-in ready houses.
These homes are close to everything buyers are looking for: the downtown shopping district, top schools, nightlife and culture, and the beaches.
What Domain Homes is building gives buyers the ability to live in a desirable neighborhood, without having to purchase an older home in need of repairs and serious upkeep.
For buyers, this is a win-win situation.
Demand for a home is high right now, from both buyers and renters. There’s a limited supply of homes to purchase or rent, which is putting pressure on prices.
But buying is still a better option. Low mortgage interest rates mean buyers will be able to get monthly payments they can afford. And home values are rising, so the home you buy this month will see a strong appreciation in the next year.
Domain Homes is the Tampa Bay area’s urban renaissance new home builder, procuring home sites in Tampa Bay’s most sought-after, established neighborhoods. That includes South Tampa, West Tampa, North Hyde Park, the Heights, and St. Petersburg.
These affordable homes are close to school districts, amenities, shopping, and all the essentials considerations buyers have when purchasing a home.
With prices rising, the time to buy is now.
Call Domain Homes today at 813-580-8111 to learn more.