In case you hadn’t noticed, rental rates are out of control. Combined data from RealtyTrac and the U.S. Department of Housing and Urban Development shows that the average monthly rent on a three-bedroom residence in 2017 will cost 38.6 percent of the average person’s salary. In some markets, this figure jumps to a jaw-dropping 50 percent. What’s the deal with these sky-high rental prices, and why are people still willing to pay them?
To understand why we send our landlords such a frightening amount of money on the first of every month, we have to rewind to 2005. The housing bubble ignited a foreclosure crisis. As homeowners lost their properties over the next few years, they drove up the demand for rentals. Then, Millennials flooded the housing market. Burdened with an insane amount of student loan debt, homeownership seemed impossible. The result? An even greater demand for rentals.
In the last decade, nine million Americans have become new renters – the biggest 10-year gain in history. Combined with the slow pace of new construction, there simply aren’t enough rentals to go around. We see this first hand here in Summit County, where rentals are incredibly hard to find. First-time homebuyers have a much easier time buying a condo. And to tell you the truth, they’re better off – whether you rent or buy; you’re still paying a mortgage.
You read that right. Even if you rent, you’re still paying a mortgage; and it’s your landlord’s. Oh, and you’re helping her build wealth in the process, too.
According to the Entrepreneur Magazine article, “12 Practical Steps to Getting Rich,” owning property is essential if you’re serious about your finances. The article states, “Over time, the money spent on your mortgage is far better invested than money spent paying rent.” In a way, your mortgage acts as a forced savings account. Owning a home allows you to build equity, which you can tap into later in life should a major expense come up. By renting, you’re essentially providing that security to your landlord instead. Bummer, right?
Another reason paying your own mortgage is economically savvy is because you’ll always have the stability and certainty of knowing what your monthly payment will be. For the next 30 years, at least. Rental prices, on the other hand, are only going to continue to climb – and that’s if you can even find a property to rent. New construction can’t keep up with demand, which means more renters are holding on to the places they have.
Basically, there’s never been a better time to quit renting and buy a place of your own. Mortgage rates are still at historic lows (Freddie Mac’s report from last week shows the rate for a 30-year fixed mortgage at 4.23 percent) and there are new homes placed on the market every day. Whether you’re looking to buy your first home or a vacation property to rent during ski season, now is a great time to start paying your own mortgage and stop paying your landlord’s.
When you’re ready to start your home search, give us a call! Let’s meet up for coffee and chat about what you’re looking for. As your Breckenridge real estate agents, we’ll have your back throughout the entire home buying process. We can’t wait to help you find your dream home!