Rent in Arizona is on the rise. In the last 15 years, rent prices in the Southeast Mesa area have almost doubled. Though these prices are rising on a national scale, prices in the Phoenix metro are rising even more.
Klaus Team agent Susanne Lynch reports that Las Vegas and Phoenix have been alternating as the cities with the highest increases in rent prices. Though there are multi-family properties in the works, many people are still choosing to rent. Because of this, prices are expected to continue increasing. Despite this, Freddie Mac reports that 82% of renters see renting as more affordable to homeownership.
Millennials and Gen-Xers are already facing pressure from rising childcare costs and student loan debt. These generations still have the dream of homeownership, but they’ve had to put it off. Some millennials, however, are still getting a foot in the door.
Though renting rates have doubled in our area, people who bought homes in 2004 are typically paying the same now as they were then. On top of this, a portion of their monthly payment goes directly into their equity because they’re paying down the loan. By owning a home, people are making an investment. The net worth of a homeowner is 34 times more than that of a renter, and it’s because of home equity.
The benefits go beyond money. Research shows homeowners have better health, volunteer more, and have children with better reading and math skills. In addition, the children of homeowners are four times more likely to stay in school.
Homeowners receive tax benefits due to interest expenses, and they can also include capital gains due to home appreciation. CPA Mark Weech explains that homeowners may receive tax deductions because of interest and property tax. Renters, however, cannot receive these deductions.
Currently, 44% of Americans believe you need a 20% down payment to buy a home. In addition, 44% say the biggest reason why they don’t own a home is that they lack the money for a down payment. Steve Farrington of Loan Depot explains that the 20% down payment is a myth. Conventional programs let you put as little as 3% down, and FHA programs are at 3.5% down. The VA loan has no down payment requirement. On top of these, there are down payment assistance programs as well.
Nationwide, the average down payment is around 5.3%. Arizona’s average is higher, sitting around 15.78%. This is because our homes cost less when compared to other states. If someone pays less than 20% for a down payment, they must pay for mortgage insurance.
Borrowers pay a PITY payment: principal, interest, taxes, and insurance. The lender will pay the taxes and insurance on the borrower’s behalf. When a person puts 20% down, they don’t have a mortgage insurance payment. This brings their monthly payment down significantly. The more someone invests into their home initially, the less they’ll pay over the life of the loan.
People who switch from renting to owning are usually surprised by how affordable it is. For example, a person will only pay $1,600 per month if they buy a $270,000 home with $13,500 down and a 4% loan.
If you have any questions or would like more information, feel free to reach out to us. We look forward to hearing from you soon.
