The Rent v Buy Discussion

Are you considering renting versus buying when you arrive at JBLM?  The two primary concerns that most people have is wanting to learn the area, and how long they will be here.   This is a discussion that I have on a regular basis, and I wanted to share what I have that it tangible.  There are some compelling reasons for both arguments, but the bottom line is that if you think you will buy, do it now.

rent-vs-buy

The growth of Western Washington has resulted in a real estate market unlike most of the rest of the country.  Property values increased by about 15% last year, and probably would have gone higher, if not for the appraisal industry holding things back.  An example I made several months ago (170,000 CA drivers license’s turned in to the State of WA last year) is having an obvious impact on the housing market.   We have a shortage of housing, and prices are going up…but only as fast as the banks will let it.

The local housing shortage has had a similar impact on the rental market…but the rental market is not held back by appraisals.  A $250,000 home, with a mortgage payment of approx. $1400, will rent for $1600-1700….which is unheard of in the real estate industry.  Extremely low interest rates, coupled with the fact that values can only go up so fast, have made for what can best be described as a backwards market.  Obviously, if an asset will rent for more than what it costs, prices are going up.

Aside from prices going up, a bigger consideration is interest rates.  Rates for a 30yr fixed VA mortgage, as I write this, are about 4.25%.  They have been as high as 4.6 % several months ago.  Although the fed has not raised the prime rate, they have taken other actions that are causing rates to go up.  Without getting into a discussion about what drives mortgage interest rates, I believe rates are going to increase to a more “normal” range of 5.5-6% by spring of 2015…they are already moving in that direction.  A 1% rise in interest rate equates to about $210 per month on a 250K home, and that means $210 per month for the next 30 years.

If you think you will buy a home in the JBLM area…if you are going to retire here, but want to wait for the perfect retirement home…consider that you may wait yourself into a higher price along with higher interest rates, which all equals higher payments.  If you make the decision to rent, I would keep a toe in the water, because these things tend to change very quickly.  We are in a seller’s market, with buyer’s market prices…A situation which certainly won’t last.

#rentahome #rentvbuy