The high cost of waiting to buy

As anyone who rents understands…it’s sure tough being a renter in the Pacific Northwest! The reasons for this ever-increasing difficulty are many, but they really boil down to three main things:

• People are getting priced out of King County, and they see our region as much more affordable.
• More people across the country are discovering that the Pacific Northwest is a highly desirable place to live, which drives up housing demand.
• Housing inventory in our area is very scarce relative to this demand, and lower housing supply means tougher competition.

All of these factors drive up housing costs – which means both rent as well as home sales prices. It’s no wonder the Tacoma area is now apparently America’s hottest housing market! Here, however, is where renting and owning starkly contrast. Renting in a rapidly appreciating housing market is very bad news. You can only expect your housing costs to continue escalating (not-so-fun fact: according to the federal government, 40% of Tacoma households are housing cost-burdened, and these are overwhelmingly renters). And in a way, you are paying a mortgage: your landlord’s.

Owning in an appreciating market, on the other hand, can be very opportune. In most cases, you buy a house with a fixed-rate mortgage. This means that aside from property taxes, your monthly payments stay pretty consistent over the years. Meanwhile, your equity in your home continues growing. This can help tremendously if you want to sell your home to buy a different property, or even if you want to tap into your equity to buy an investment, make improvements to your house, or pay off other debt. You’ve basically just made a bunch of free money.

Put another way: As a home owner, time is on your side. As a renter, time is working against you.

Now for some good news for people currently renting. The barrier of entry to home ownership is actually significantly less challenging than you think. The average down payment percentage last year in the United States was…5% down. Not 20%. Not even 10%. 5%. Most FHA down payments are as low as 3.5% down.  If you’re a veteran, you can make a 0% down payment with a VA loan.

And for most people who meet the criteria, you can receive down payment assistance – which itself is either zero-interest or very low-interest – to help cover all or most of the cost of what down payment you do have. The City of Tacoma offers additional incentives on top of this. And finally, if you happen to work in downtown Tacoma at any of the listed participating businesses, you may qualify for potentially thousands of dollars at closing if you buy within the city limits.

Click here if you are interested in hearing from a reputable local lender in our area who can provide more information about resources for first-time home buyers. Click here to predict what your monthly mortgage might be!

To be clear, there’s absolutely nothing wrong with renting. It’s much more flexible than owning, and if you’re highly mobile or uncertain about where you’re going to be, it may be the best call. But if you’re looking to put down roots in a community – and for you it’s a question of when rather than if – then there’s no ambiguity. The “when” is now.

Anders Ibsen

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