Homeownership. It used to be a significant part of the “American dream.” In recent years, however, it has gotten a rough reputation. With the subprime mortgage crisis and the economic meltdown that followed, many have falsely surmised that homeownership isn’t the way to go. This is just not the case.
Back in 2008 the housing market crashed, the economy fell into recession and then Lehman Brothers went belly up, bringing about the worst financial crisis since the great depression. A decade later, we were starting to come up for air. The economy had gained back most of the jobs lost and it seemed to be smooth sailing to a full recovery.
Then we were hit with a pandemic. Early on, the US economy plunged at its fastest rate in history. The jobless rate went from 3.5% in February of 2020 to 14.7% by April. However, despite economic predictions and mass joblessness, the recent economic recovery is among the fastest in American history – at least on paper.
What is the state of the housing market amidst all this insanity?
Right now, real estate predictions have Salt Lake listed as a “slightly hot” real estate market. And, even with the current pandemic and the unemployment rate, real estate in Utah over-all is on track to have one of its best years ever.
Year-to-date home sales are currently 8% above last year’s pace. In Davis County, sales in houses are 5% higher than last year. This trend can also be seen in Weber country, up 7%, and Morgan Country where home sales are up 36%. The rise in home buying is being seen most significantly in Utah county where cash sales are up 52%. Over the last 60 days, there have been 187 sales as compared to the 123 during the same period last year.
Utah County’s traditionally affordable communities are seeing the largest increases as the bottom of the market continues to rise. Eagle Mountain saw a sale-to-list price of 104% in January, followed by Payson at 103% and Spanish Fork at 101%, as buyers try to own homes any way possible.
Though sales may be up, home prices are up as well. In those three aforementioned counties, home prices have risen; 10% in Davis County, 11% in Weber, and 9% in Morgan. In Utah County, home prices are also trending up 10.2% year-over-year. Demand for houses is high and looks to remain high for the near future which means the housing shortage is still with us.
During the pandemic, we have seen a mass exodus from big cities like Los Angeles and NYC. People are looking to get away from heavily crowded cities and go where there is more space and opportunity. A great number of those fleeing are fleeing to Utah.
Utah is second in the nation for job growth. This adds to the housing demand as well as the housing shortage. On top of that, Utah has a large young population. These younger folks are looking to start households and will soon be looking to purchase their first home.
The combination of the young population and Utah’s growing job market is predicted to support a strong housing market well into 2022. However, the demand for homes is still rising.
Construction has picked up again however, the demand for homes is going to continue to put upward pressure on home prices. Consensus forecasts expect an 8% increase in home prices in 2021 and a 5.3% increase in 2022.
Currently, the federal reserve has a policy of keeping mortgage rates low until inflation picks up so this will sustain mortgage rates over the next few years. Forecasters predict a 30-year fixed rate at an average of 3% for the rest of 2021 and 3.5% in 2022.
President Biden and his administration are toying with a $15,000 home buyer tax credit. This should make things a little easier for those hopeful first-time buyers, however, will there be houses for them to buy? The tax cut doesn’t help the housing shortage at all.
Demand for houses is now and is likely to remain strong. With the pandemic and the trend towards spending more time at home, and remote working the market will be influenced. Buyers are now looking for houses better suited for the lifestyle changes we’re all facing.
However, no matter the financial state of the nation, the demand for houses still outweighs the number of available homes on the market.
Houses are less available than they have been in the past combined with an increase in millennials and baby boomers seeking more flexibility is causing a demand for more rental properties. The demand is causing rents to increase. The year over year predicts rents will continue to rise as long as the housing shortage continues.
With the housing shortage and rising rents the question still arises: is it better to own or rent. For us, the answer is an unequivocal OWN! And here are a few reasons why.
If you’re paying rent to a landlord, what do you really have to show for it at the end of the month? At the end of the year? Nothing. However, if you buy a home with, say, a 30-year mortgage and make your monthly payments, you own the house at the end of the road. It’s yours when it’s paid off. You never own anything when renting. There is no end to monthly payments. You cannot pass the place down to a kid or sell it to make a profit. Owning a home is an excellent long-term investment, whereas renting is a never-ending cycle of dumping money into a landlord’s pocket with nothing to show for it.
Property values have risen, and they are expected to keep rising well into the future. This means that any money you spend on your home will provide significant returns due to the rising property values. And, if you make any improvements on the land or the house, that only increases the value. Also, remember, every mortgage payment you make, a part of that goes to pay down your loan each month, giving you equity in your home. When you pay rent, you simply pay rent and have no future investment gains.
Currently, these historically low-interest rates make buying a home exceptionally appealing. Locking in a 30-year mortgage rate today could save you hundreds of dollars each month for decades. If you do a little research, you’re going to find that current monthly rental rates are higher than a mortgage payment. And, with homeownership, you get the added benefit of …
Owning a home means you get the benefits of annual tax write-offs and mortgage interest payment deductions. These deductions represent significant savings and, they aren’t offered to renters.
As has been stated a few times, rents are rising, and they are going to continue to rise. As a renter, you have no idea when or if your rent is going to go up. This can wreak havoc on your monthly budget. With a fixed-rate mortgage, you never have to worry about that. You’ll pay the same amount every month, every year, until it is paid off. That makes life and a budget so much easier.
So, those are some of the strictly financial reasons why buying is better renting, but, we all know, buying a house is more than dollars and cents. There are emotional and lifestyle considerations as well. So, here are a few non-financial reasons why buying is better than renting.
If you’re renting an apartment, you have no control over your neighbors and what they do. They could be loud partiers, and you can only complain so often without getting results. And, even if you rent a house, you’re never sure what your neighbors are going to be like, and you basically have to put up with the hand you’ve been dealt. A homeowner decides the neighborhood, the neighbors, and the people making noise upstairs are all part of your family. No strangers, no unwelcome neighbors.
If you want to paint clouds on the ceilings and sunflowers on all the walls, go ahead. If you want a tire swing on the tree outback, go ahead. If you’re going to add a porch or a swimming pool to increase the house’s value, go ahead. You can do anything you want with the property because you own it, and you don’t have to beg your landlord to let you make changes. Your house is yours to decorate, add to, paint, dig, plant, or whatever else you see fit. No one has to give you permission.
A home represents more than a financial investment to most people; It represents roots, permanence, a place to raise a family to forge memories, and to have a piece of personal history to maybe pass down to the children or grandchildren. A house, with the activity and love of family, swiftly becomes a home. No matter how long you rent, there is a feeling of impermanence, and it’s harder to pass down a rental property than it is to pass down an owned home. A home is a secure place for a family, a place to grow and create a lifetime of memories and happiness. It simply feels different from renting.
If you’re a single person, just starting out, then renting is a good idea. Roommates are a good idea. However, eventually, you’re going to have the desire for something more, something permanent, something with roots and a possibility of history. When that time comes, it’s much better financially and personally to buy a home rather than rent.
And new homes like semi-custom-built homes are an excellent investment. When you’re ready to get serious, plant some flowers and trees and family roots, it may be time to check out Revere Homes. They offer a variety of floor plans and places to build your semi-custom new home.
It is still the American dream, a place of your own to raise a family, grow old in, cultivate memories, forge friendships, throw lavish parties, or just sit in your yard and watch your garden grow. After all, no great story ever ends with; and they rented happily ever after.
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