There are many reasons why renting makes sense and you should consider those reasons objectively. However, home ownership can also be a wise decision and if buying a house will benefit your family, 2012 might be the year you want to think about buying.
A Record Number of Families can Afford a Mortgage
According to Kiplinger, the percent of family income consumed by a mortgage payment is at record lows. The average family pays only 12% of their monthly income to pay for today’s mortgage. It hasn’t been that low since 1971. Additionally, the Fed’s financial obligations ratio for mortgage holders have fallen to levels not seen since 2003.
The Costs of Buying a House Hasn’t Been this Affordable in Decades
Not only can more families afford a home, costs of purchasing a home are at record lows. This fall home buyers have seen record lows in mortgage interest rates. The National Association of Realtors Housing Affordability Index hit a near record last August with an index of 183.7.
Rent Costs are Inflating Rapidly
Thanks to a sluggish economy, there is not a large growth of new apartment complexes. Yet, more and more people are choosing to rent instead of own. Occupancy for apartments is at a national high and when supply remains fixed while demand increases, prices will rise. That’s exactly what renters have seen. PR Newswire estimates that rents are up 4.5% this year and expected to climb another 3% next year. Rising rent and falling home prices/mortgage costs have pushed the ratio of home prices to yearly rents to a low of 11.3; only slightly above the 1989-2003 average of 10.
Economic Reasons Why You Shouldn’t Buy in 2012
Let me temper all this positive news for potential home buyers with some pessimism. While there are strong indications of a good buyers market, there are also many potential roadblocks for families looking to buy. Most of them have to do with uncertainty in the market place.
- Soft Economic Recovery – unemployment is still high and the threat of a European debt crisis is creating a lot of talk about a new US recession. Renting creates a lot of financial flexibility when the economy is struggling.
- Financial Regulation Fallout – new financial regulations may push the bar higher for down payments on new mortgages and the requirements could go as high as 20%.
- Foreclosures Continue to Stall Housing Prices – Banks still have a glut of foreclosures to sell and while this presents an opportunity for discounted home prices now, it could mean that prices could fall further.
Buying a home is never an easy decision to make, but since the housing bubble burst, there are a number of positive signs in the marketplace that 2012 could be a good year for families to purchase a house.
Read More on the Topic of Buying and Renting:
- Cool to be Frugal: Buy or Keep Renting?
- Financially Poor: Why Now is a Good Time to Buy Your New Home
- Yes, I am Cheap: To Rent or Buy?
- You Have More Than You Think: Who Says You Can’t Pay Cash for a House?
- Financial Samurai: Why I’ll Never Rent Again and Neither Should You
- Not Made of Money: Renting or Buying – Which is Cheaper?
- Saving Money Today: Renting vs Buying