Rising Rents Making Many Renters to Re-Examine Homeownership — 2012 Portends Strong Rental Market for Multifamily Property Owners

Source: Ted C. Jones, Stewart Title Guaranty Company

Apartment asking rents increased 2.8 percent last year according to Rents Marcus and Millichap   https://www.marcusmillichap.com/services/research/reports/National/MarcusMillichap_2012_NAR.pdf while effective rents (after consideration of all discounts, giveaways and specials) jumped 4 percent.  At the same time, median U.S.home values declined 3.9 percent.  Marcus and Millichap expects 2012 to see even added increase in rental rates with a forecast  85,000 new unit deliveries but with demand for at least 120,000.  Apartment vacancy rates, which nationwide declined from 6.6 percent in 2010 to 5.4 percent in 2011, are expected to drop to 5 percent in 2012.  The bottom line is that rents are going up once again 2012-and depending on where you live, buying may become a better economic decision.

Again I invoke the TINSTAANREM clause-There Is No Such Thing As A N ational Real EstateMarket, as every market is different.

To examine the relative favorability of buying versus renting, typical rents were gathered from 141 different markets and compared to median home prices.  Rental information was taken from ApartmentRatings.com  http://www.apartmentratings.com/   which compiles online reviews and rental rates for more than 1.2 million units across the U.S.  The rental data are for two bedroom units with any number of baths.  These monthly rents are annualized by multiplying times 12.  This annualized rent is then divided by the median home price (actually, the median home price average from the first three quarters of 2011) as reported by the National Association of Realtors®.   I believe all would agree they would rather live in the typical median priced home than a two bedroom apartment.  Never-the-less, the ratio does have a usefulness in assisting in the decision to buy or rent.  The cost of owning a home with 30-year interest rates at 4 percent (actually, a little less), and property taxes, insurance, homeowner association fees and maintenance residing in the 3 to 4 percent range, is 7 to 8 percent of the value of the property per year.  This very simplified analysis ignores many obvious negative and positive factors such as the down payment, closing costs, the tax benefits of interest and property taxes and any increase or decline in the property value.

This first table shows the rents, median home prices and the ratio of annualized rents to median home values sorted alphabetically by market.  The ratio of annualized rents to median property value ranges from a high of 15.92 percent to a low of 3.27 percent with an average of 6.99 percent.  Renters in markets with high ratios should give homeownership a serious consideration.  Is the sample of rents a true representative random and representative listing of rents?  Probably not.  But the sample is large and the comparison consistent.  Click Here to view table.

The following table ranks the Metropolitan Areas from the largest to the smallest ratio between annualized rents and median home prices.   The larger the ratio, the more favorable it is to own rather than rent.  Click Here to view table.

The bottom line is that rental rates are going up, and may that are renting today could reduce their housing costs today and at the same time hopefully upgrade their housing environment.

Feel free to search for Albuquerque Homes Here!   If you want to know the value of your home click Here!

If you are interested in looking more into home ownership, contact Joe Brooks you real estate Expert.

Happy Monday Below is some info about a loan program available.  I would be glad to put you in touch with a lender should you be interested in Albuquerque Real Estate

• FHA has a loan program that the financial industry has lovingly labeled: The “Kiddie-Condo”
Loan (although, they are not limited to the purchase of a condominium … it can be a standard
single-family home.)
• Essentially, here are the highlights:
1. The maximum FHA loan for Sandoval, Bernalillo, and Valencia Counties for a single
family dwelling is $271,050.00. (This mode of financing might also be available for duplex,
triplex, and a four-plex … please check with a loan officer for verification.)
2. The min. down payment on single family dwelling is approximately 3.50% of the purchase
price. (You may be able to qualify & the funds are available, for the MFA program which
includes 3.5% grant money in combination with this FHA  Loan type.  If the purchase
agreement is orchestrated correctly and the buyers closing costs were shifted to the seller
… the minimum contribution required by the buyer is only $500.00.) Call to find out more
… as this program … as is all programs are subject to change.
3. Parents can purchase the home and place their son or daughter in it. (The reverse can
happen too. Let’s say the children have some elderly parents with a fixed income, they …
the children … can qualify for the home … adding whatever income and debt that the
parents have … and qualify based upon the combination thereof.)
4. They all will be on title for FHA purposes. Different for FHA/MFA which only the owneroccupant would be on title and the only eligible property is a single-family dwelling.
5. Qualifying is based on the strength of the buyers’ and parents’ credit scores, debt to
income ratios, etc. 
6.  The child is not required to have taxable income, however, credit must be
acceptable with at least 1 credit score.  If the child is a student with no income, non
traditional credit is NOT allowed.   FHA will no longer allow alternative sources of
credit for borrower’s who have no credit or taxable income at all.  
7. Borrower’s must have 2 months cash reserves for total PITI monthly payment of their own
funds.  No gift of reserves is allowed.
8. This program is used many times by families who choose, while their child goes to college,
to have them in a house … rather than in a dorm. Sometimes the program is used to help a
young family get a head-start.
9. During that time, everyone in the family is benefiting from home ownership and the
appreciation associated with it, while not wasting money for housing for the student (if
applicable).
10. The child also benefits, as he or she is establishing a credit rating of their own.
11. The parent benefits in as much as the normal down payment on “investment” property
can be as much as 30% and the interest rate would be higher as well. This would be
considered “owner-occupied” as the son or daughter is living in the home.

If you would like additional info give Joe Brooks Realtor a call at 505 977 3474

We have reported that almost six million adults between the ages of 25 to 34 are currently living with their parents. That number reflects an almost 50% increase since 2003. These young adults are now being advised to jump into homeownership.

Who are the people selling them on the American Dream? Their parents! It seems that parents of some adult children are strongly suggesting that their children take advantage of the low cost of homeownership available today. Some moms and dads are helping financially and are even co-signing for the mortgage. Middle age parents who have owned a home understand its true value. A home has always been a good long term financial investment. However, homeownership also has many other benefits.

In Fannie Mae’s most recent National Housing Survey, they asked the question directly:Is this a major reason to buy a home?

The study broke up the answers into financial and non-financial reasons. The top four reasons and six of the top ten reasons were NON-FINANCIAL. The top four are below:

1. It means having a good place to raise children and provide a good education.
2. You have a physical structure where you and your family feel safe.
3. It allows you to have more space for your family.
4. It gives you control over what you do with your living space (renovations & updates).

Should this surprise us? Aren’t these the same reasons our parents bought their home? Aren’t these the same reasons we purchased our home? These are the same reasons parents have suggested their children buy a home. They want the same things for their grandchildren that they believed to be important for their children.

And today, the cost of homeownership is at all time lows:

J.P. Morgan

“The numbers on housing have an important message for American families today, and particularly younger families setting out on life’s great adventure: Five years ago, at the peak of the home-buying euphoria, it was emphatically a time to rent. Today, when home ownership is depreciated more than ever before, the numbers tell us it is a time to buy.”

MSNBC.com

“Someone who plans on staying put for seven years would come out ahead by about $9,000 if they bought a median-priced home rather than being a tenant in a median-priced rental.”

HUD

“Homes today are more affordable for average families than they have been since 1971. Median-income families today have nearly double the funds needed to purchase the average home.”

Bottom Line

Now that the economy is beginning to show signs of stabilizing, people are getting back to the core values that families have always embraced. Homeownership is definitely high on that list. And today, from a financial standpoint, it may be the opportunity of a lifetime.

If you are interested in looking more into this option Contact Joe Brooks your trusted Realtor to get you on the right track.

GAS EMERGENCY: LEAVE A FAUCET ON “DRIP” IF YOUR HEAT GOES OFF
If heat is shut off to your residence or business because of the current natural gas shortage, please turn on an indoor faucet to drip to prevent frozen and burst pipes.

Allowing a faucet to drip will keep water flowin Read more…

Compared to 4th QTR 2009 the average sale price of a home has increased 4.64 percent and

the median sale price rose 2.29 percent. Read more…

If you’re thinking of selling your home, and you expect that the total amount you owe on your mortgage will be greater than the selling price of your home, you may be facing a short sale. A short sale is one where the net proceeds from the sale won’t cover your total mortgage obligation and closing costs, and you don’t have other sources of money to cover the deficiency. A short sale is different from a foreclosure, which is when your lender takes title of your home through a lengthy legal process and then sells it. Read more…

Use Experts like Joe Brooks your Abq Realtor to Navigate Homebuying Process 

In a growing atmosphere of the do-it-yourself mentality, some wonder should I take on the homebuying process on my own. It’s certainly been done, but, more often than not, homebuyers turn to the experts when it comes time to making, what will often be, their most expensive purchase.  Read more…

www.JoeBrooksHomes.com has just been updated with many new cool features. 

Check out all the wonderful features of this new revised website. 

*You can search for homes many different ways. Read more…

There are countless decisions to be made when selling a home, and many of them will significantly affect whether or not you make a profit and how much time it takes to sell your home. Joe Brooks can offer specialized knowledge in research, marketing and negotiations to help you meet or exceed your goals. According to the National Association of REALTORS®, 82 percent of home sales are the result of agent connections. Read more…