The Housing Market: Rent or Buy?
FaithFi: Faith & Finance | Feb 6, 2024
Show Notes
IMPACT OF COVID ON HOUSING MARKET AND RENT VS. BUY DEBATE
There’s no question that we’re still feeling the impact of the COVID pandemic. The COVID pandemic significantly disrupted the housing market, increasing home prices and rental rates, making it challenging for first-time home buyers.
Also during that time, rental rates also skyrocketed.
In the age-old debate, rent vs. buy, things have shifted.
CURRENT HOUSING MARKET CONDITIONS:
- Skyhigh mortgage payments: On average, new mortgage payments are now 52% higher than apartment rents, the largest gap in 27 years, according to CBRE.
- Low first-time home buyer activity: Only 26% of buyers were first-timers in 2022, the lowest percentage on record by the National Association of Realtors.
- Steady home values despite high mortgage rates: Despite expectations, high mortgage rates haven't lowered home values due to low housing inventory.
RENTAL MARKET AS THE NEW "VALUE OPTION":
- Changing perspective on renting vs. buying: Renting is now seen as more financially sensible for many, as it doesn't involve skyhigh mortgage payments and allows for flexibility in this uncertain market.
FUTURE MARKET CORRECTIONS EXPECTED:
- Market self-correction: The free market is expected to adjust—more houses built if needed, material costs to decrease with increased production, and interest rates to align with economic conditions, potentially making housing more affordable.
STEPS TOWARDS HOMEOWNERSHIP WHILE RENTING:
1. Reduce debt: Pay off credit cards and make extra payments on car loans to improve the debt-to-income ratio.
2. Improve credit score: Ensure timely payments, check and dispute any errors on credit reports to secure lower interest rates.
3. Increase savings: Save diligently for a down payment, aiming for 20% to avoid private mortgage insurance, ultimately reducing monthly payments.
SCRIPTURAL ENCOURAGEMENT:
Follow God’s financial principles and see what He will do. Romans 12:12 reads, “Rejoice in hope, be patient in tribulation, be constant in prayer.
ON TODAY’S PROGRAM, ROB ANSWERS LISTENER QUESTIONS:
- I have about $4,000 in credit card bills due to lawyer bills and am considering taking money out of my IRA to pay it off; is this a good idea?
- My husband and I are considering selling our rental properties due to active management demands, but are concerned about capital gains; are there any other options?
- Our church has $500,000 we'd like to invest to get a better yield than our current savings account, considering we'll need some of the money in about 14 months; what do you recommend?
- I retired in January and have two 401(k)s not performing well; I'm considering moving some of the money into more guaranteed interest options and need advice on what percentage to allocate.
- I have a home with a $72,000 mortgage and $90,000 in savings; should I pay off my house with the savings?
RESOURCES MENTIONED:
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