Should You Buy Or Rent In 2011 – The 2011 question of should you rent or buy a house is a big one. Many people are on the fence and don’t know which side of the gate to fall. It is a very big decision and one that carries ripple effects throughout many industries and professions, but one that must be answered by those interested in moving this year.
For those real estate investing, the question is very important as well. Investors must understand the trends in the market so they can make their investments appropriately. Do they want to purchase distressed properties, fix them up, then sell at a profit? Or should they buy moderate properties to feed the growing rental population?
Should You Buy Or Rent In 2011
Should You Buy Or Rent In 2011
The question of should you buy or rent in 2011 comes down to one fundamental question you should ask yourself. We will go over this question before I give you my recommendation for 2011. Please understand, this is just my opinion of the market. Please take it as an opinion and do your own personal research with professionals you trust before you make this decision.
I think it is widely accepted that purchasing a home is better than renting one over the long haul. Eventually prices in the real estate market are going to increase just as they have over the past hundred years or so in this country. They may not skyrocket like they did in the recent past, but there should be some sort of growth in the future.
The questions you need to ask yourself before you make the decision to buy or rent in 2011 is this.
Do You Think Property Values Will Increase or Decrease in 2011 and 2012?
The determining factor in if you should buy or rent in 2011 should be in alignment with where you think the real estate market will be in the next one to two years. If you believe prices have hit rock bottom, then now is the time to buy your home. If you believe prices have not hit the bottom and will continue to fall in 2011, even 2012, then there is no reason to rush out and purchase a home in this market.
In my personal opinion, now isn’t the time to buy a home. I think you should rent. The reasoning in my decision here is because I don’t believe the market is done falling just yet.
Currently, there is a buyers market. This means there are more sellers in the market than buyers. In markets like this, home values tend to drop because buyers don’t feel pressure to compete for a new home. They can just go down the street and the same house is available, maybe for even less. Buyers are not in a rush to purchase, but sellers are in a rush to sell, so they will continue to lower their homes.
Secondly, there are still a flood of foreclosures to be processed and flooded onto the market. I recently read an article which said there are more than one million foreclosures still left to be processed from 2010, which means the foreclosures from 2011 haven’t even begun to be processed yet.
These additional foreclosed properties will flood onto the market adding even more inventory for buyers to decide from. This will further create an imbalance between sellers and buyers, thus driving down property values even further.
For me, the obvious decision is to wait to buy a home. It is not like the homes are going to run out. With so many on the market and so many more due to come, you will still have the pick of the litter in late 2012 when home prices may have stabilized and you don’t have to buy into a falling market.
I said all of this without even mentioning the weak economy in the market, which is not strengthening the falling market at all. In fact, the economy could be worst than we all can even imagine.
All of this sets the stage for an uncertain 2012, let alone 2011. If you are interested in my opinion, then I say you should rent in 2011….and maybe even 2012. Give the market a chance to shake out all these properties, recover from the the struggling economy, to give your future a chance.
I would love to hear your opinion of this topic. Be sure to chime in on if you think you should buy or rent in 2011, what say you? - Should You Buy Or Rent In 2011
I disagree with your analysis that renting now is the best approach. First of all, there has never been a better time to purchase a home for a great price with so many houses on the market, many being forclosed. With careful study of each property, there are a few great deals to be made out there. Second, interest rates have never been lower, and are now approaching 3%. I have owned two homes that have been financed multiple times for better rates, and I NEVER saw anything near 3%. Lastly, with so many people afraid to purchase a house, there is a huge demand for rentals. A home purchase can be rented out to pay down the mortgage, increasing the equity in the property. Just sit back and collect the rent. Yes, some repairs will be required, and property management requires some skill, which is a valid consideration. Bottom line, if you feel secure in your job, now is a good time to score a great deal and hang onto it for 5 fives or longer.
Your point about mortgage interest rates is a great one. No one can deny they are at historic lows and you can’t predict they will remain this low forever, so now isn’t a terrible time to buy for that matter. However, I feel they will remain low for the next two years or so because the government has to spur the home buying economy if the overall economy is going to make it. Therefore, I don’t feel it is a rush to buy right now.
To your first point, home values are low….we think, but my point is the are continuing to fall, so there is no need to rush into a purchase right now. Frankly, I think we have another 2 years of falling values due to the number of foreclosures you and I mentioned hitting the market. Sure you can buy now and five years from you should be in the clear, but if you wait another year or two you can buy even lower. That is assessment anyway.
The demand for rentals is fierce right now, so buying a home and renting it out isn’t a bad idea at all. You can get some really great deals on that end. If you are an investor, I think the time to buy is now because of low interest rates and high rental prices.
Thank you for sharing and commenting. You make some very good points.
I agree that we haven’t hit bottom yet and the Fed announced that they wouldn’t raise rates until mid 2013. I have been thinking about buying a house for 2 years and am still waiting for when I feel is the opportune time. I also like the feeling of freedom that renting gives me if I decided to switch jobs or got laid off.
The flexibility is great! And let’s be real, the market is tanking. People can act like it isn’t if they like to, but I own a home and am watching the value fall everyday. It is depressing. Keep renting until you know the time is right.
First off, one needs solid, viable employment, before even considering BUYING a home.
Next, there are the additional costs to homeowning besides the mortgage itself. A reserve
for any unexpeceted expenses is critical. There are utilities, insurance, taxes and all of the
maintenance required to maintain the value of the home. In this economy, owning is a rare
and unrealistic option for most average people.
You can’t make a rule about this because there are too many variables. Smart money always buys value and there are many undervalued homes for sale. It would be foolish for anyone to pass up a house that meets their needs & wants and they know it’s priced right for current market conditions. Worrying about whether the price will go lower is a crap shoot because someone else could come along and snap it up. Just because more foreclosures may hit the market, who knows what condition they’re in. Many defaulters are sabotaging their properties just because they’re angry. If you are paying, let’s say, $800/month to rent, a year from now you’ll have set fire to almost $10,000 with nothing to show for it. The key is to know what you want or need in a house, have an understanding of values in your market, and be able to see the difference in quality of various homes. A lot of foreclosures are newer construction and they are often cheaply built to begin with, or cookie cutter designs where the neighborhood all looks the same. Also, with rents rising because of demand, it makes sense to buy if you plan to live in the house for at least 5 years. Real estate always rebounds eventually and it’s better than paying off someone else’s mortgage via a rent payment. Renting is good for anyone who needs job mobility or who is uncertain of their job stability or for someone who has sufficient income to take the rent loss or for someone who already has ownership of a second property to fall back on. As for interest rates, don’t count on any predictions from anyone. The economy is volatile and market forces are in flux every week.
Interesting comments – except that not once does the writer mention what market and what country or countries he/she is talking about! So, in the end, it is useless.
Dennis,
Sorry about that. Sometimes I forget this is a global market. The blog is primarily about the US market, therefore, I assumed everyone knew that…however, you know what they say about assumptions.
Will be sure to mention the market in the future. Thank you for your comment!
I think right now (at this economic condition) it would be best to rent instead of purchasing homes. Like what Kristine said, “…in this economy, owning is a rare
and unrealistic option for most average people”.
Under normal economic conditions I would say rent, but depending on where you live (and your credit score) there are likely buying opportunities that haven’t been available in decades. I wouldn’t rush though, there are still plenty of bank owned properties that haven’t even hit the market yet.
Dan – BankVibe recently posted..Attractive Rates Offered Through Foreign Currency CDs in 2012