Agents have always operated under the premise that it is always cheaper to buy a home than to rent. However, in today’s market many agents are running into one problem: A supply of homes for clients who want them.
With home prices rising faster than incomes and faster than new incomes, it still is cheaper to own vs. rent a home. Data indicates that sales are dropping because there are few affordable homes for sale. According to a CNBC report, listing fell 9 percent in April compared to the previous year. The number of days it took to sell the average home dropped to just 29 days, according to the National Association of Realtors, the lowest mark since NAR began tracking that in 2011. Danielle Hale, managing director of housing research at NAR, said the group has been adding additional information which will be helpful to agents as they get ready to serve clients in a supply-short market.
“One thing we added this month to our Realtors confidence index is analyzing data on realtors’ comments. The two biggest phrases in the comments this month were ‘low inventory’ and ‘multiple offers.'”
Agents are finding that, unfortunately for their clients, the most affordable segment of the market is where supply is the tightest. Sales of homes priced below $100,000 fell 17 percent in April compared with 2016, and in the under-$250,000 category, where the demand is greatest from younger buyers, sales fell more than 6 percent.
As a result of many of these trends, the advantage of buying versus renting is narrowing in many markets. Agents may see pockets where rents are easing as more new apartment units are completed, and home prices are rising. That makes the math more difficult.
As an agent, this could spell tougher times ahead as other factors such as flexibility and low risk tend to tilt the scale toward renting. At the current pace, if rents ease up more and homebuilders don’t increase production, home prices will continue to rise and clients could continue to move toward the “rent” column.
But there are some bright spots for agents.
A recent survey by Trulia reveals that in the nation’s 100 biggest metros it is still cheaper to buy than to rent if the households plan to stay in their home for seven years and can afford to put 20 percent down and a 30-year fixed rate mortgage. Nicholas Lynch, a professor of accounting at California State University Chico, agreed that the market is “crazy” but noted that one silver lining with the housing market’s limited supply may be a new construction boom.
“New home builders are booked out a year or more. With rates still low the best time to buy in today’s market could be now as rates will rise and it will take time for prices to come down.”