By Margaret Kelly
We all know that the benefits of homeownership outweigh renting in the long run. But in many U.S. cities, that’s the case even with shorter time frames. And we can do a better job of helping people realize that.
Earlier this year, homeownership reached a 19-year low due mostly to lingering effects of the recession. The U.S. Department of Commerce reports that homeownership peaked in 2004 at 69.2 percent, but it has declined ever since the housing downturn began in 2007. The rate is now at 64.8 percent—the lowest it has been in nearly 20 years.
Two key reasons for this downward trend are tepid income growth and fewer skilled, professional jobs being added back to the economy. The uncertain future of the job market is keeping some consumers on edge, and many of them might be delaying a purchase until their career prospects look a little brighter.
Several housing studies conducted this year, however, reinforce the fact that homeownership is still less expensive than renting. According to Trulia’s 2014 Rent vs. Buy Report, this was the case nationally and in each of the 100 largest metro areas. Assuming a 30-year fixed mortgage rate of 4.5 percent, buying is 38 percent cheaper nationally than renting, the study found.
The Trulia report points out that the rent-versus-buy math is different in each local market. But renters who might mistakenly think that homeownership is out of reach can benefit from the expertise and guidance of a local real estate expert like you. If renters are ambivalent about buying a home, your market knowledge can help quell their fears and misconceptions about homeownership.
For some renters, the obstacles associated with buying a home, particularly the down payment and closing costs, might delay their home purchase until they can get their finances in better shape. But with rental rates skyrocketing in many large (and small) cities and showing little signs of slowing, the message to relay to potential homeowners on the fence is simple: Why pay someone else’s mortgage when you can pay your own and build equity at the same time?
Do the math for renters. Look at rental and vacancy rates in your market versus the costs of buying a home with a monthly mortgage payment. How long would they have to stay in a home to make it more cost-effective than renting? (It might not be as long as they think.) Would they prefer to build equity in a property—even if it’s a starter place and not a dream home—so they can eventually move up?
Opening the conversation with renters in a non-invasive way is a great start to building loyalty. Create a section on your website aimed at assisting renters who want to transition into homeownership, and put as much local information on it as you can. Send targeted messages to renters via email and social media to educate them about the advantages of homeownership—and how you can help them find the right home.
If you invest time in being a resource for renters now, your efforts may pay off later—when those very people think of you when they’re ready to buy a home.
Margaret Kelly (CRB) is chief executive officer of RE/MAX, LLC.
For more information, visit www.remax.com.