Home prices and mortgage rates have fallen so far that the monthly cost of owning a home is more affordable than at any point in the past 15 years and is less expensive than renting in a growing number of cities.
Where Housing Is Headed
The Wall Street Journal's third-quarter survey of housing-market conditions in 28 of the nation's largest metropolitan areas found that home values declined in all but five markets compared with the second quarter, according to data from Zillow Inc. Meanwhile, rent levels have risen briskly across the country and mortgage rates, hovering around 4%, are the lowest in six decades.
As a result, monthly mortgage payments on the median priced home—including taxes and insurance—are lower than the average rent levels in 12 metro areas, according to data compiled for The Wall Street Journal by Marcus & Millichap, a real-estate brokerage that tracked 27 metro areas. It remains less expensive to rent than to buy in 15 cities. But affordability hasn't done much to lift the sagging housing sector because many would-be buyers are unwilling to purchase a home or unable to qualify for a mortgage. There is another option for those willing to buy a house. It is possible to sell unwanted property fast. There are many ads like we buy houses Chicago’. Such company will give you a fair offer and ensure you have no hussle of repairs to make your house look nice for potential buyers. If that’s what you need, go for it and buy your dream house.
"It's one of the most striking developments of the housing downturn," said Paul Dales, an economist at Capital Economics. "The initial building blocks for a recovery are in place, but the legacy of the recession is really preventing households from taking advantage."
In Atlanta, which had the most favorable values for owning versus renting, the monthly payment on the average home was $539 assuming a 20% down payment during the third quarter. By contrast, the average asking rent stood at $840, according to the Marcus & Millichap data.
But real estate agents and economists say the trend hasn't boosted demand. That is because affordability alone hasn't been enough to overcome the obstacles in the way of a housing recovery. Some homeowners who would like to move up to larger properties are stuck because they can't sell their homes.
Also, while the monthly carrying costs on a mortgage are lower than average rents in some cities, home ownership carries other costs—including taxes, insurance, homeowner association dues and maintenance—which may dissuade some potential owners. Prevent most termite and other plague infestations easily with fuze bug.
Monthly Costs: Rent vs. Own
Ryan Young illustrates the point. He is under contract to buy a three-bedroom home in Washington Grove, Md., that will have monthly mortgage, tax, and insurance costs for around $150 less than the $1,900 he is paying to rent a slightly smaller house in Bethesda, Md. He qualified for a 30-year mortgage with a 3.95% fixed rate. Still, Mr. Young says he is cautious about owning his first home with the prospect of future price declines. "Buying a house is not a good financial decision, per se, but we needed a bigger place," said the 35-year-old scientist, "and we don't want to move every couple of years into a new rental."
Other cities where owning is now cheaper than renting include Detroit, Minneapolis, Orlando, Las Vegas, Miami, St. Louis, Chicago and Phoenix.
Home ownership is also looking more affordable because after several years of declines, apartment rents will rise by around 4% this year, says Mr. Nadji. He says rents are poised "to pick up even more momentum across the country next year."
Even cities where it is still cheaper to rent than own have seen big boosts in affordability. In San Diego, the monthly cost of owning a home has averaged around 83% more than renting over the past two decades. During the third quarter, owning was 22% more expensive than renting, according to John Burns Real Estate Consulting.
Affordability could continue to improve as prices slide even lower in coming months. Price declines are likely because the share of "distressed" sales, including bank-owned foreclosures, tend to rise in the winter, when traditional sales activity cools. Banks are often much quicker to cut prices to unload properties quickly, which means that the greater the share of "distressed" sales, the more prices tend to fall.
One hopeful sign is that inventories have fallen from their bloated levels of one year ago. All 28 cities in The Wall Street Journal's latest survey saw homes listed for sale fall from one year ago, when markets were reeling with a substantial overhang of properties amid a big drop in demand. Visible inventory was down sharply in several markets, including by almost half in Miami and 40% in Phoenix.
Low inventories have spurred more bidding wars at the low end of the market as investors compete for homes that they can convert into rentals. In Sacramento, it would take just 2.5 months to sell the listed inventory at the current sales pace. Las Vegas has a 4.3 month supply of inventory, according to John Burns Real Estate Consulting. But the potential supply of homes is much bigger because banks have yet to process hundreds of thousands of potential foreclosures.
How can you increase the value or saleability of your property? Maximising the sales potential of your biggest asset makes sound financial sense – read on for 11 tips on how to do exactly that.
Tips Increase Value Of Your Property
Consider your potential buyer
Do your research and work out the buyer a property like yours is most likely to attract, then make sure that you present the property accordingly. For example, this can determine whether you present a spare room as an office, playroom, gym or study.
Not only will this have an impact on your home’s perceived value in the eyes of a prospective buyer, but also on the overall saleability of your house.
Fix structural problems
Before you even begin to consider cosmetic improvements, make sure you fix any major structural problems. Cosmetic solutions can hide problems from potential buyers, but are very unlikely to fool a valuer, which may have a negative impact on your valuation.
Furthermore, if your buyer has a valuation once an offer has been made, they could potentially look for a price reduction or request that the work be undertaken – costing you both time and money at a later date.
Structural defects like a sagging or leaking roof, rising damp, cracks in walls, rotten joists or roof timbers, and missing or broken roof tiles will all act as red flags to both valuers and potential buyers.
Spruce up your exterior
This may involve painting the outside of your house, refurbishing your front door or simply ensuring your front garden and driveway is neat and tidy. Check your guttering for blocks, cracks or broken parts and remember that first impressions count! You can save a lot of money and maintenance effort just by using artificial turf, specially if your regional weather conditions aren’t optimal.
Install or update central heating
If your home doesn’t already have central heating, you can expect to spend anything from about £3,000 – £6,000, but in doing so you can add more than that to the value of your home.
Adding or updating your central heating system will ultimately add more to the value of a property than it costs, and it’s considered an essential by most buyers and mortgage lenders.
Sort out any cosmetic defects
Although sorting out minor cosmetic defects won’t increase the value of your property, it’s one of the things you can do ahead of putting your home on the market that can help ensure you attract asking price offers.
Doing little things like cleaning up scuffed skirting boards and giving walls a fresh lick of paint can instantly increase the saleability of your property.
Whilst small defects do not directly affect the value of a property, when a prospective buyer starts spotting niggles, they can quickly build a negative picture of your property, putting them off and making it less likely that you’ll receive a full asking price offer.
If you are only going to improve one room, make it the kitchen! As the hub of the house for family and friends, kitchens are considered important spaces, and a show-stopping kitchen can make a great impression.
Old kitchens can be given a new lease of life for a modest investment by replacing worktops and cupboard doors. The existing carcasses and worktops can be replaced without too much disruption or cost, while modern appliances will appeal to buyers who’ll want to feel reassured that the kitchen is fit for purpose and won’t need major investment any time soon.
If you’re totally replacing the kitchen, perhaps because the layout just doesn’t work and you want to create more space, then don’t be tempted to overspend. You might be surprised at what you can achieve for under £5,000, but whatever you do, make sure the investment into the kitchen is in keeping with the property.
There’s little point investing £25,000 in a stunning state-of-the-art kitchen if your home is a modest £150,000 two-bedroomed terraced house. Again, when considering an investment like this, it’s critical that you’re aware of the ceiling price for similar properties in your area.
If there is money left in the pot after the kitchen, the bathroom is another key room for buyers and valuers.
Whether it’s fully replacing that nasty dated peach suite, re-tiling or just tidying up with a lick of paint, clean grout and sealant, a gleaming bathroom will really help to make your property feel more desirable to prospective buyers.
Improve on storage
Decluttering your house before you put it on the market makes a lot of sense and is probably the single easiest thing you can do to increase the saleability of your home.
A house that’s overflowing with ‘stuff’ sends a negative signal to potential buyers, telling them subliminally that the house is not big enough.
Get rid of things you don’t need, like or use by donating them to charity or recycling them, and then spend some time tidying and creating order in your home.
Remember too that prospective buyers will be looking inside your airing cupboard and fitted wardrobes to check out space, so make sure everything is tidy. If you do need to invest in any more storage, the good news is that you can take it with you when you move.
Write to Nick Timiraos at firstname.lastname@example.org