Why to Buy Instead of Rent Even in a Tight MarketPosted on Dec 10, 2017
When it comes to the question of why to buy instead of rent, it's critical to think long-term. Without a doubt, homeowners build more wealth over time with a substantially higher net worth compared to their peers who rented. But in Colorado's tight market when sellers have the upper hand, is it still better to own? According to an article by The Denver Channel, renters are simply paying someone else's mortgage. People who own homes build equity over time. In fact, the article reports homeowners have a net worth of about 45 percent greater compared to average renters.
Enjoying low interest-rates
First-time home buyers in their 30s don't remember double digit interest rates, but their parents often struggled to afford a home in the 1980s. Today's interest rates remain at historic lows with average rates still less than 4 percent. Some people argue that landlords pass on their "savings" whether they pay less because of a lower interest rate or due to tax deductions. But in reality, most landlords don't base their rent on what it costs them to own an investment property. They base the rent on supply and demand or "market rent." Owning a home means largely fixed expense, although property taxes and home owner's insurance rates sometimes fluctuate.
Following the five-year rule
Although nothing is absolute, most experts suggest people buy a home if they plan to stay put for at least five years. The five-year rule for home buying means you give yourself enough time to cover closing costs before hoping to upgrade. Every time you buy or sell, you pay closing costs. In other words, if you plan to live in a home for one year and then move to another city for a job relocation, renting is often a better plan. On the other hand, many homeowners turn their Colorado house into a rental property when they want to move. When homes appreciate quickly as they do in the Denver-area, some homeowners find they recoup their closing costs in fewer than five years.
Ultimately, most people want to own their own home so they can have the freedom to decorate it as they wish. Home ownership is still a top goal for millennials who are willing to negotiate. At Team Lassen, we specialize in the Colorado real estate market. For more information about why to buy instead of rent in Colorado, please contact us today.