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Three Causes It Would possibly Be Higher to Lease in 2021

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As mortgage rates continue to fall, purchasing power in the US increases. Despite a lower number of houses for sale compared to previous years, many tenants are turning to buying their own homes, leaving a large vacancy in the tenant market.

San Francisco is a prime example. The vacancy rates have more than doubled and prices have fallen. Prior to 2020, San Francisco had some of the highest rents in the United States with exorbitant demand for housing.

With all the benefits of city life disrupted due to the pandemic, many cannot justify the high rent. The increase in supply gives the potential tenant more choice and lower prices – a unique position of power for a typically competitive market. While home buying may be tempting right now, there are many reasons why deciding to rent may be the best financial move for you.

1. Buying a home is expensive

Even though mortgage rates hit record lows, buying a home is still very expensive. It might be unwise to jump the gun to take advantage of a low rate – especially at a time of economic turmoil.

The buying process alone incurs huge fees and commitment. Matt Hyland, financial planner at Arnold and Mote Wealth Management, said, “Between closing costs, brokerage fees, and home appraisals and inspections, you will likely pay tens of thousands of dollars to buy or sell your home.”

[ Read: Compare Best Mortgage Rates for December 2020 ]

Renting can save you money on running expenses in many ways – property taxes, homeowner insurance, utilities, and maintenance. Hyland also told us, “When you own a home, you are prone to high costs that can come out of nowhere.”

For those without large emergency savings, or with reduced or irregular incomes, he adds, “Renting isolates you from these large one-off costs that can arise. If you are scared of paying more than $ 5,000 for a new air conditioner or roof, renting may be a better option for you. “
Renting can also add extra amenities that can save you money. A fitness center, pool, dog park, and other amenities that you might otherwise pay for are often included when renting an apartment.

2. It’s just a sellers’ market

Even if you are approved for a cheap mortgage rate, home buying can now become competitive. It’s a seller’s market, so houses are more expensive and lots of offers lead to a bidding war. You may have fewer options in the market without evaluating the home you love or feeling rushed to make a purchase because the homes are selling so quickly.

[ Read: About to Close on a House? Avoid These 9 First-Time Homebuyer Mistakes ]

Jonathan Faccone, executive member and founder of Halo Homebuyers, said, “Some homebuyers have chosen to wait, others just can’t find anything they like, while others are consistently outbid.” According to Faccone, even agents are advising potential buyers to wait until the market hits the hot seller is over.

“Despite this low interest rate environment, this may be the most financially prudent decision. By renting you can wait for better offers and prices and save with a larger deposit. ”

3. You can live anywhere

There is a lot of uncertainty for people about when they will return to work. Some young professionals are taking advantage of the remote work structure and moving out of urban centers – Apartment List reports that Honolulu has been number one in finding short-term housing for the past six months. But because tenants don’t know when officials will reopen and if they need to move again, long-term renting or buying a home is impractical.

[ Read: Does It Make Sense to Never Own a Home? ]

According to Hyland, this transitory lifestyle is particularly appealing to young professionals, “who tend to be more active as their careers progress. In today’s remote working age, I think this makes renting even more affordable. “A key question that Hyland points out is,” If you could work anywhere, would you continue to live where you are now? ”

“Until we move into a new normal, renting gives you the flexibility to make changes to the way you live much more easily than if you owned a house.”

But if you are planning to rent, keep that in mind

Emile L’Eplattenier, Chief Real Estate Analyst at The Close, warned us that not every deal is as impressive as it seems to renters: “There are sure to be opportunities for renters to trade up to bigger deals and nicer ones once a decade Apartments, as vacancy rates are currently high. ”

[ Read: How to Negotiate Rent With Your Landlord ]

In this case, tenants should be aware of the rent-free periods offered by the landlords. “While the total expense for the year may indeed be attractive, any rent increase is based on the ‘gross rent’ which is the actual rent minus any months free.”

Too long, not read?

If you are a tenant do not hesitate to seize the moment. As people continue to move away from urban areas, the leases will continue to expire and more units will come onto the market. Before committing to a home purchase, take a close look at your finances and your goals for the next year. Renting can save you money and enable a flexible life situation.

We appreciate your feedback on this article. Contact us at enquiries@thesimpledollar.com with comments or questions.

Credit: Yulia Shaihudinova / Getty Images

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