WHY THE BEST TIME TO BUY A HOME IS ALWAYS NOW!
Ah, the American Dream: Homeownership. Its as red, white and blue as apple pie. Not to mention there’s the prestige. Do you rent or own? That question seems to come up on every financial application. Everyone knows that the answer that invokes pride is “I DO own.” It shows responsibility and financial stability. It shows the world that you own a piece of that American pie. And there’s knowing that each month that housing payment you make is going towards something you own verses only your landlord’s wealth!
Yet many Americans are still painfully aware of what happened to the housing market in 2009, when the banks decided it would be a great idea to buy up a bunch of junk bonds that ultimately caused the bottom to fall out of the market and home prices to plummet. Homeownership is a huge commitment, financially and otherwise, not to mention the task of coming up with the necessary credit score and the down payment. It is the informed buyer who ultimately does best, so here we will examine the current housing market, the best time to buy a house in Las Vegas and what that means if you might be. considering buying real estate in Vegas this year.
A Simple Calculation
If you are currently considering homes for sale in Las Vegas, there are several factors to consider. Since buying a home will be the biggest purchase you will make in your lifetime, naturally the financial benefit needs to be significant to you over renting. To determine if a home purchase makes financial sense, you need to know roughly how much time it will take for paying a mortgage to become cheaper for you than paying rent for close to the same amount on an equivalent property.
Zillow’s renting verses buying calculator compares the two, using factors in closings costs, down payments, monthly payments, utilities, maintenance, insurance, taxes, and renovation costs, along with home-equity growth for buyers. For renters it calculates the income they would earn investing the same money in an interest-earning account.
Planning to Stay A While?
Zillow’s findings say buying is a better deal than renting if you plan to stay in your home for more than 1.5 years, (the national average,) and in Las Vegas specifically, it is even lower than that, at 1.2 years. (1.)
Stan Humphries, Zillow’s chief economist, summarizes what this means for potential buyers nationwide: “If the buy-versus-rent decision were about simple math, we’d likely have millions more homebuyers in the market, because the equation is tilted heavily in favor of buying.” (1.)
A “No-Brainer”
In Las Vegas, this couldn't be more true, as those moving to this area are seeing the below median house costs coupled with the high demand for rentals created by so many in the service industry here. This results in it often being possible to end up paying the same or less monthly by buying instead of renting.
In fact, Deb Shields, relocation director for Windermere Prestige Properties, says, ”Right now our rental market is in demand so good ones are harder to find and sometimes rent costs more than what it would be to purchase a home," she said. "There are also security deposits and pet deposits so you might end up dishing more cash out of your pocket when getting into a rental.” (2.)
Steve Hawks of Platinum Real Estate Professionals noted that, "Taking advantage of low-interest rates and not throwing your money out on a rental is a huge advantage of buying a home," he said. "If you know you'll like Las Vegas then it's a no-brainer to buy.” According to Hawks, a home in the less-than $350,000 market is often cheaper than renting in the long run. (2.)
The “Tax Break” and “Merciless Landlord” Perks
The tax break they are referring to is the capital gain exclusion, that allows married couples to exclude $500,000 or individuals up to $250,000 of profit, saving most homeowners a significant amount in income taxes each year, enough to make buying verses renting the obvious choice.
Other financial advantages favor the homebuyer as well. There’s the increase in buying power, because as you make your mortgage payments, your personal wealth increases, which gives you the ability to use your increasing good credit to purchase just about anything.
Additionally, the stability of house payments under a fixed-rate mortgage gives the homeowner peace of mind, knowing exactly what they will be paying each month for the next thirty years, verses the renter who is at the mercy of his/her landlord. Plus, as a homeowner, you never have to worry about the landlord suddenly deciding to get out of the rental business and sell the home, forcing you to abruptly relocate.
Help With Affording Those Big, Future Necessities
Homeowners can also use a home equity loan to pay off higher interest rate debts. Home equity loans offer lower rates and are also deductible, providing the homeowner with a much financially smarter way to afford many of life’s costly necessities, such as dissolving credit card debt, paying for their children’s college or starting a business. And by paying their mortgage on time year after year, the homeowner can significantly boost their credit score and overall buying power.
Borrowing Made Easier
They say timing is everything, especially in the housing market, and the timing couldn’t be better for Las Vegas real estate. First, lenders are loosening their restrictions. If you have good credit, a loan is getting easier to obtain. These less stringent restrictions on loans go nicely with Las Vegas’ increasing choices on homes, as the once tight inventory is also loosening.
Additionally, although borrowing costs are on the upswing, they remain historically low. According to The Las Vegas Sun Times, the average interest rate for a 30-year mortgage in April 2016 was 4.3 percent, up from 3.5 percent a year ago but down from 8.2 percent in spring 2000. In 1990, it was 10.4 percent and in 1980, a whopping 16.3 percent! (3.)
Choose Well, Live Well
There are more houses to choose from. The valley's once-tight inventory is loosening. In April, there were 6,420 used homes on the market without offers, more than twice the number a year earlier. The Times also states that home values are set to increase, rising by 6 percent into next spring. (3.)
So is it the right time to buy a home? Even with the off chance that something completely unlikely will happen, like it did in 2009, homeownership still makes sense, because you are ultimately putting your dollars toward something that is yours, as each month a percentage of your payment goes toward the principal of your home. Chances are very good that your home will not only hold its value, but increase, providing you with an overall, sound financial investment. And knowing that in only 1.2 years of you after you purchase a Las Vegas home, the cost of owning it will be cheaper than renting, it makes sense to make your next move an investment in the ultimate American dream.
Citations
(1.) Robinson, J. (2015, April 10). Here’s why buying a home is a better deal than renting in Las Vegas. Retrieved February 17, 2017, from http://www.reviewjournal.com/business/here-s-why-buying-home-better-deal-renting-las-vegasb.
(2.) Friedman, A. (2015, November 29). Moving To Las Vegas: Rent or Buy. Retrieved February 17, 2017, from http://homes.reviewjournal.com/news/resale-news/moving-las-vegas-rent-or-buy.
(3.) Segall, Eli. (2017, February 18). Is now the right time to buy, sell or rent? Las Vegas Sun. Retrieved February 18, 2017 from https://lasvegassun.com/news/2014/may/25/now-right-time-buy-sell-or-rent/
