Home Ownership – Why It’s Time to Take the Plunge

We’ve shared the benefits of home ownership with you before – from avoiding costly rent increases to enjoying tax benefits to locking in a record low 30 year fixed rate, home ownership is a savvy financial decision. Many first time home buyers are nervous about their ability to afford a new home and the monthly payments that come with it. However, the case for home ownership has never been stronger – see what we mean below!

#1. Borrowing has never been more affordable.

Today more than ever, the benefits of home ownership are clear: with both the 30 year fixed rate near 3% and inflation at 3%, the amount a home buyer will pay to borrow money has never been closer to zero! Think of it this way:

3% inflation rate means that $1.00 today buys the same amount of stuff as $1.03 one year from now.

3% mortgage rate means that for every $1.00 you borrow today, you’ll owe $1.03 one year from now.

Starting to see a pattern? Essentially, the 30 year fixed rate a home buyer can lock in today is so low, it’s like borrowing $1.00 today only to give back the equivalent of $1.00 in a year – the closest to “free money” we’ve seen in recent history.

Don’t take our word for it, though – there are a lot of very smart people out there who agree that the time for home ownership is now! For example, legendary investor and billionaire Warren Buffett recently shared this take on home ownership:

“If I had a way of buying a couple hundred thousand single-family homes, I would load up on them.”

The Wall Street Journal’s Smart Money blog agrees with Warren Buffett’s take:

“Two key measures now suggest it’s an excellent time to buy a house as a long-term residence…First, the nation’s ratio of house prices to yearly rents is nearly restored to its pre-bubble average, suggesting the financial advantages of home ownership once again await buyers. Second, when ultra-low mortgage rates are taken into consideration, houses are the most affordable they’ve been in four decades of data.”

#2. Rent increases mean that home ownership is much more affordable in the long term.

Rapid rent increases are occurring across the country – while purchasing a home locks in one, regular payment. In fact, a recent study by Marcus and Millichap stresses the importance of understanding the reality of the market vs. perception.

Many prospective homebuyers believe that remaining in a rental situation is a cost effective solution. However, based on this current study, they may find that the long-term cost far outweighs that of a purchase.

The study examined the significant rise seen in the cost to rent from 2009 to 2011. Marcus and Millichap also project that rental prices will continue to climb through 2013. This visual (courtesy of Better Homes and Gardens Real Estate) illustrates just how quickly rent increases have occurred in the past several years:


What’s more, the financial benefits of locking in a monthly payment with a 30 year fixed rate make home ownership an even better decision. Just look at these figures from Forbes:

“A homeowner with $1,500 monthly payments would still be writing the same check fifteen years later while prices everywhere increase around them. If rents . . . simply kept up with inflation at a 3.2% annual increase, a $1,500 rent payment would cost that renter nearly $900,000 over the next 30 years.  The same $1,500 payment made to their mortgage would be only $540,000 (because the payments don’t increase with inflation) and of course would end with a final payment.

Tired of rent increases? Want to lock in an incredibly affordable monthly payment at today’s record low 30 year fixed rate? Give us a call today at 800-325-3030 to find out how to take the next steps toward home ownership.