If you follow the news, then you know that there is a rent crisis happening around the Portland Proper area. There are numerous reasons as to why rent is increasing at an alarming rate, but the fact that there is a steady stream of newcomers and a construction backlog means that there isn’t any relief in sight any time soon. So how does one know when it is time to get off the rent increase merry-go-round and jump into the real estate market? Simple; the best time to stop renting and buy a house is when it costs less to buy than to rent.
That makes sense, right? But how do you figure that out? First, find two similar homes – one for sale and one for rent – and divide the asking price by the annual rent. For example:
A three bedroom house with an asking price of $350,000, and annual rent for a comparable home at $25,200 ($2100/mo.) the rent ratio would be 14.
Experts vary in their opinions as to where the rent ratio tipping point is, but most would agree that it is around 15-20. Therefor, a rent ratio below 15 is a fairly good indicator that it may make the most financial sense to consider buying rather than continue renting.
So know that you have a gauge, what is the next best step? Make an appointment to speak with a Mortgage Broker (I highly recommend Brad Hansen at Academy Mortgage in Wilsonville and Lake Oswego). They can give you an accurate assessment as to your purchasing readiness and if you’re not quite there, get you on a path so that you will be ready down the road. With interest rates at an all time low (in some cases hovering right at 3%!), there’s never been a better time to consider your options!
When you are ready, give me a call, and let’s begin the journey to homeownership together!