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Rental Payments, Mortgage Payments, Your Life and the Big Picture

Rental payments versus mortgage payments—which one is right for you?  This problem has been a debate for centuries.  Palm State has not discussed this issue for a while.  It seems like a good one for the New Year as families begin to plan budgets and new beginnings. Thus this blog will focus on the rental payments in various markets, to be contrasted with the option of buying a home, even a starter home in 2018.

Is the Rent vs. Buy issue–a moot question?

Rental payments and mortgage payments pull income in different directions. Which way should you go in 2018?

Rental Payment or Mortgage Payment–Which way do you take on the 2018 path of your life?

There are pundits that say the markets allow no advantage.  In our opinion, both types of payments claim a high price and a large part of your income.  Palm State Mortgage puts it this way:  It might be just as expensive to make rental payments as it is to make mortgage payments.  However, in our opinion, you will eventually discover many more rewards in home ownership than in renting.

Some of those rewards cannot be measured in dollars.  However this blog, Part One of our Rent Vs. Own topic coverage is all about the dollars in an ultimate coast to coast coverage.  We are covering the advantages of owning versus renting with statistics as fresh as December of 2017.

2.   Geography counts!

The impact of finding it almost as expensive to rent as to buy depends largely on the Location.

For example, real estate experts at Trulia reports that in Tacoma, Sacramento and Milwaukee, the median rental payment rose only 3.1% last year.  “But in many markets, prices rose significantly.  It rose three times as much in Tacoma, Wash., Sacramento, Calif., Milwaukee and Los Angeles.  Rents rose 8% or more based on our estimates.”  Read on to see the increases in rental payment rates in the trendy areas or the really smoking hot markets.

3.  Time and Socio-Economic Climate Counts:

As of last year, Trulia found that in the time period from the end of 2012 until the present, rental payments have increased 19.6% across the US.

However, residents of places like Cape Coral-Fort Myers, FL or Oakland, CA or other trendy rental markets, have seen rental expense go up 50 percent just since the end of the recession.

Putting the Rental Payment Data Together:  3 Big Observations

Rental payments bring a certain lifestyle to young families.

Rental Payments are a temporary solution for some young families.

So, according to experts, we have made three big observations:

1.  Whereas 3.1 percent is a healthy increase in rent, nationally rents will continue to be somewhat less than buying housing price increases.  However, the benefits will be fewer.  Rental payments do not accrue equity.

2.  The West is still the Wild West.  And landlords must have profitable lives, no offense intended.  The western states “lead the country in rent increases, with seven of the top 10 metros with the biggest rent increases…”  And three of those areas are in California.

3.  California has raised the rental payments the highest of all the states.  San Jose, Calif., San Francisco and Sacramento, Calif., ranked in the top 10 for rent increases during this period.

The Big Picture in Rental Payments

So, if we look at this data, the obvious Palm State Mortgage Company take-away is that rents have risen the most sharply in the trendy places where they were already expensive.  Experts use San Francisco, the nation’s high rent leader, as an example:

“San Francisco leads the nation in estimated median rent at $4,000 monthly,  it also has seen the seventh-biggest five-year increase (37.9%) among the nation’s 100 biggest housing markets.  In San Jose, Calif., where rents rose 40% since 2012, the estimated median rent is now $3,500.  This is second only to San Francisco.”

Palm State’s Take-Aways for Perfect Payment Planning

Rental payments do not grow equity.

Beyond rental payments are the mortgage payments and pride of ownership.

In contrast, we can look to Florida and find rental payments averaging $1,700.00.  Thus, Cape Coral-Fort Myers with a $1,700 median rental payment comes in at 31st in the top 100 US housing markets.

But when we survey the data for home ownership, we made an interesting discovery.  Many markets in our area are close to equal in expense when you are presented with rental payments or a 30 year fixed home mortgage with a good down payment and good credit score.

Careful Research is Your Secret Sauce

So do your research. When you elect to buy, we typically recommend that you be prepared to live in that home for at least 7 years. (If you are a first time home buyer, don’t fear that idea; 7 years will go by more quickly than you think.  And equity is a beautiful thing!

Overall, when we look at the majority of housing markets, the numbers say that it is 37.4% cheaper to rent than to buy a home, as an average.  But be cautious, there are many variables at work.  In our next blog, we reveal the millennial’s best kept secret hack for rent market payments—the Roommate Factor.

Read all about it in Part 2, and find out more about deciding what’s best for you–rental payments or mortgage payments.  Just as this Part 1 was all about the stats and facts of rental payments, Part 2 of this series will focus on the 2018 pros and cons of adopting mortgage payments and enjoying the advantages of home ownership.

2018-01-25T22:34:55+00:00 January 25th, 2018|