While purchasing a home is part of the American dream, many young Americans are still trying to determine if that is the right dream for them. With large amounts of student loan debt, saving for a down payment can seem cost prohibitive. Others wonder if now is the time to move from a starter home into a larger home for their growing family.
In Colorado Springs, there are additional factors to consider when it comes to making the decision to rent or purchase a home. Let’s discuss four of them.
Rising Cost of Rent
Urban areas are being hit hard by increasing rental costs, especially as demand rises but supply remains steady or increases only slightly. In March 2018, Colorado Springs rents rose 11.4%, according to a survey by Apartment List, a rental service based in San Francisco. While that is a sharp increase, rent in Colorado Springs remains relatively cheap in comparison to other cities. A 2-bedroom apartment median rent is $1,010, whereas that same apartment has a median cost of $1,770 in Denver, and almost $5,000 a month in San Francisco.
Clearly, renting in Colorado Springs remains a viable economic option, but rising housing costs could make buying more appealing. Why?
Improving Economy Equals Higher Demand
The stronger economy is driving the fast pace of market rents. When young people feel confident in their economic opportunities, they may opt out of a cohabitating situation for a place of their own. Empty nesters also find apartments appealing, as they downsize out of their family homes and the maintenance that comes with them.
Increasing demand from both these groups, along with limited apartment construction in Colorado Springs, impacts market rents, because supply is simply not keeping up with demand.
Your Landlord is Making Money While They Sleep
While renting may still be a budget friendly option for you, keep in mind that your rent is providing an income stream for your landlord, but not any long-term financial benefits for you.
Landlords in high demand areas can raise their rents, confident that if one tenant will not pay that rate, another one will. With property improvements, positive changes to the neighborhood, and new employers in the area, landlords have multiple reasons to increase rents, thus allowing them to keep up with market rates. As a landlord, their property is increasing in value as home prices go up. Plus, the property’s equity is growing, both in terms of the home’s value and the decreasing mortgage.
Rising Home Prices Reflect Demand
At the other end of the spectrum, home prices are continuing to rise in Colorado Springs as well. Remember the increasing demand for rental properties means that those who can make a purchase are doing so right now to avoid rising rents.
The resulting tight market is another issue of supply versus demand. It has become a sellers’ market, and homes in desirable areas tend to go quickly, driving up prices even further. If you are in the market for a new home, waiting to purchase could mean that your budget will buy you less home in a few months then it would right now.
According to Trulia, the market trends for Colorado Springs show an increase of $29,000 (11%) in median home prices from last year. One- and two-bedroom homes have seen the largest increases year over year, but larger family homes are also on the rise.
When you take into consideration the increasing cost of rent and the rising costs of real estate, you might be thinking that now is a good time to get into the market and purchase a home. However, some potential home buyers could be scared away from applying for a loan by the thought of a 20% down payment. Working with Elevation Mortgage, we can determine the best financing options available based on your needs.
For instance, there are programs available that allow for a lower down payment, while still giving you the advantages of a fixed rate mortgage. If you are ready to transition from being a renter to a buyer, we can help you get started by determining your mortgage options. To learn what you may qualify for, contact us today for a free quote.