Rising Rents Shine a Brighter Light on the Value of Homeownership
Independence, OH (July 11, 2012) — As rents around the country continue to increase, the value of homeownership remains strong. Results from the National Association of Realtors® Commercial Real Estate Market Survey show vacancy rates in the multifamily sector are decreasing, meaning apartment availability, or landlord-owned spaces, is tightening. As a result, rents are rising – creating a landlord’s market.
Coupled with this trend, a number of recent surveys show the American dream is still alive and well. According to a recent report from the Woodrow Wilson International Center for Scholars, 75 percent of current renters hope to purchase a home of their own in the near future. Another study, commissioned by a large real estate valuation firm, found that three out of four Americans still aspire to own a home and consider it a life goal.
Joanne Zettl of the Cleveland Area Board of REALTORS® (CABOR) is not surprised that consumers continue to aspire to homeownership.
“Homeownership is an investment in your future, and Americans recognize the benefits it brings over time,” said Zettl. “For many people, rising rents can drive the value of ownership home – after all, a fixed-rate mortgage might last 15 to 30 years; renting is forever.”
According to NAR’s Commercial Real Estate Market Survey, the average apartment rent is expected to rise 3.8 percent this year compared to 2.2 percent last year, and the trend is on track to continue into 2013.
The decision to own a home is a very personal one, but given today’s market conditions, it makes sense for people to consider homeownership over renting. Fixed-rate mortgages remain at record lows, which means that a mortgage payment could be cheaper than monthly rent. And unlike rent, a fixed-rate mortgage won’t steadily increase at the landlord’s discretion.
Owning a home has also never been more affordable. NAR’s Housing Affordability Index rose to a record high of 205.9 in the first quarter of 2012, the first time the quarterly index has broken the 200 mark since recordkeeping began in 1970. The combination of median home price, median family income, and current interest rates has opened a door for families who may have been previously shut out of homeownership. The index shows that in the first quarter, the median income family earning just under $61,000 could afford a home costing $325,500, more than double the national median existing single-family home price of $158,100.
“As landlords continue to raise rents to keep up with market conditions, and renters adapt to lifestyle changes that require more financial stability and long-term planning, homeownership is one of the best ways build a solid foundation for the future – of our families, our communities and our nation,” said Zettl. “Despite the challenges of today’s economy, the dream of homeownership remains stronger than ever in the hearts of Americans, and Realtors® are committed to keeping that dream alive for current and future generations.”