Newly elected CAAR president Anthony McGhee recently said that he believed, “If you can rent in Charlottesville you can own in Charlottesville.”
Here at Solutions, we thought this was worth investigating.
Should you buy or rent? This is a question most of us will likely face in our lives, whether buying a house makes more financial sense than renting a home.
What’s the financial impact?
There’s a way to understand the financial impact of buying vs. renting. The realtor.com® Rent vs. Buy Calculator can help you calculate the net cost of buying a home versus the cost of renting over time.
Net costs compare the total amount of money you would be spending over time, minus the potential value you might receive if you someday sell the property.
From the tool, you’ll see that the amount of time you plan on keeping the home has a major impact. You can customize the advanced options to crunch more specific numbers and evaluate more specific scenarios. But keep in mind that a financial comparison is just one of many factors when deciding whether to rent or buy.
For example – if you want to purchase a home for $250,000 and currently pay $1,500 in rent – by punching in numbers in the Rent. v. Buy Calculator the results state that buying becomes cheaper than renting after three years.
Looking at what’s currently for rent, for a two bedroom two bath unit, listings can range from $1,200 to $3,500 in town and $600-$1,400 in Albemarle County.
Charlottesville Area 3rd Quarter 2016 Highlights:
The reason many people are renting versus purchasing homes can be attributed to a lack of resale inventory based on the most recent market reports from 3rd quarter 2016, although new home sales are strong.
Homes sales rose 20.9% over the same time in 2015, the highest since 2007, led by an increase of 32.9% in attached home sales.
Greater Charlottesville median sales price remained stable at $273,864 (-0.2%).
The median Days on Market in the 3rd Quarter was 36 days, eight-days lower than in Q3 15.
The 1,719 active listings at quarter’s end represented 6.2 months of supply, down from 8.9 months at the end of Q3 2015.
The quarter reflected steady growth in land sales, driven by the 5-acre or less category.
There were 1,008 homes sold in the 3rd Quarter in the Greater Charlottesville area. This total represented a 20.9% increase versus the 834 homes sold in Q3 2015, the highest third quarterly total since 2007. The median sales price in reached $273,864 in the 3rd Quarter. This was 0.2% lower than Q3 2015 median of $274,450.
Getting ready
As we’ve noted in a previous blog, many potential buyers in our local market have already made their first steps towards homeownership – they’ve saved for a down payment, pored over the local listings for months, attended endless amounts of open houses, but time has passed them by and months, maybe even years, have passed and they’re still in their rental.
For many first-time homebuyers, making that leap into a purchase can be a frightening experience. Will you be happy there? Will your neighbors be nightmares? Will you feel tied down — house rich and cash poor? What if you lose your job? Will your commute be more than you can handle, especially if you have to live further out of the city because of what you can afford? In short, your fears stem from the unknown.
Meanwhile, your current rental is familiar. You’ve come to accept its shortcomings — the loud neighbors, the leaky toilet or faucets, the limited street parking. It has few surprises. But, you might have waited so long that some of the houses you’ve been looking at actually have come back on the market and prices continue to rise.
It’s not uncommon to feel like a home is the biggest purchase of your life – many people fear they will make a bad investment and pay too much, but a home should actually be seen as a place to live instead of just an investment.
Steps to Take
Anticipate the new costs that you will incur, such as taxes, homeowners insurance, utility bills and commuting. This will help determine the maximum price you can spend on a house.
If your budget will change with a new home, consider a trial run living on that amount for a few weeks, to make sure you can. Enlisting the help of a financial expert to get pre-qualified will give you an objective view of your finances.
Remember, the first year is the most difficult. After that you will begin receiving tax benefits.
Owning a home can be one of the most exciting and satisfying things you will do in your life. It’s a place to gather friends and family and will create many memories in the years to come. It’s also an investment that can pay you personal dividends as well as financial and tax benefits.
