The headlines around the housing market have been dominating news and discussions for quite some time. Home prices have been rising for the longest streak on record, hitting all-time highs in recent months. Fueling this surge in prices were mortgage rates at generational lows, and a prevailing housing shortage brought on by inadequate new builds, and also shifting demographics across the country. The Millennial generation became the most active group of first-time home buyers, while the Baby Boomers sought to downsize from their current homes or move to different areas for their retirement years.
With inflation now on the rise, mortgage rates are starting to climb off those generational low levels. Does this mean the housing boom is over? Should home seekers be looking to sit back and wait, and if so, wait for what? Because the age-old debate of whether to rent or own still has the same answer – it is far better to own than to rent for your long-term financial success and security.
Because while it’s true that home prices have been rising steadily for years, including 20% in the past year, average rents are also rising sharply. In fact, national average rent prices have risen faster than home prices in the past year, clocking in at 22% higher in the past 12 months. This calculator gives a handy breakdown of the costs and savings associated with buying vs renting a home, and highlights just how much rising rents affect the math of buying vs renting.
It’s also important to put the recent rise in mortgage rates in its proper perspective. Current mortgage rates of 4-5% are about half of what they have averaged over the past 30 years. A mortgage is still the cheapest borrowing an individual can obtain – and it’s being used to purchase what will become a centerpiece of your personal net worth.
Knowing the national averages is useful, but when looking to buy a home it is mission-critical to have local expertise at your fingertips. Finding a trusted community back in your local area – one that offers a full suite of mortgage products to serve the needs of both first-time home buyers and current homeowners looking to relocate is essential. In addition to the standard fixed and variable-rate mortgages for conforming loans (those below a certain threshold, which varies by region), your community bank should have jumbo loans available, and often they will even offer lending on properties that many other lenders wouldn’t consider.
FHA loan programs are great for people buying their first home, but the down payment can still be an issue for many. Here is another scenario where a great community bank can step in to fill the void with special down-payment assistance programs available for the first-time home buyer who may be worried about affordability. Unsure what kind of home price you can afford? Your local community bank’s mortgage loan professionals will be there to help, offering knowledge of the local market in addition to expertise on important home financing considerations.
This calculator can help you get a feel for the price levels in your range, but a face-to-face meeting with a mortgage professional from your local, trusted community bank will provide knowledge and insights you need to make the best decisions. The staff at a trusted community bank near you will often live (as well as work) in the region, and that local knowledge and experience simply cannot be replicated by a remote online platform or search engine.
It can be scary to make the decision to stop renting and take on the larger financial commitment of owning a home. But ownership has its privileges – you’re adding an asset that will be a cornerstone of your net worth for many years to come. The fact that home prices have been rising strongly for many years is not a sign that a reversion downward is around the corner. Home equity has been the largest driver of national wealth for tens of millions of Americans, and for good reason. Land and property, above all else, are finite resources, providing a store of value that cannot be replicated in any other type of investment.
The building of new homes remains well behind the pace the country needs, and this also provides a floor for home prices, as the demand for them will outpace the available supply for the foreseeable future.
It is undoubtedly a big decision, buying a home. When following through on such a big decision, it’s only logical to seek out a lender who has unmatched expertise and knowledge of the area you’ll be living in. A trusted community bank near you will have the tools, staff, and creativity to see you through to your dream of home ownership.