Home prices have taken a serious beating in the last few years and the demand for rental units continues to climb.  In fact, the demand for rentals has increased so much that in most of the major U.S. cities it’s actually cheaper to buy a two-bedroom home than to rent one.

According to real estate data site Trulia, as of the summer of 2011, buying a home was cheaper in over 74% of the 50 largest cities in the United States.

In addition to the decline in home prices we saw in 2011, falling interest rates have added significant weight and benefit to purchase a home.  For example, in the last 6 months we’ve seen interest rates on a 30 year fixed mortgage drop to just 3.875% with a 15 year fixed rate at 3.125%.  Larger loans for a 30  year fixed were hanging at 4%.  If you add in a lot of the tax perks of home ownership and we’re deep into a buyers market in Michigan right now.

There are a lot of things to consider when you’re trying to decide if you should continue renting or if now is the time to get a mortgage and buy a home in Michigan.  Here are some factors to consider:

How Long Will You Stay – If you’re not keeping the home for several years (at least 5 years or more in many cases) then the costs involved in buying and selling a home pretty much wipe out a lot of the buying edge

Cash for Closing – When you’re trying to get a mortgage in Michigan, it can sometimes be difficult finding a lender that will pony up more than 80% of the cost of a home.  That’s not to say you can’t find it, because there are programs in place, but having the extra cash in pocket to cover a 20% deposit puts you in a better place financially.  Closing costs on a 200,000 home could be as much as $40,000.  Setting yourself up for that is a smart move, even if you find you don’t need to have it all to secure the mortgage.

Covering Home ownership Costs – Costs for owning a home go beyond the mortgage.  Michigan homeowners need to consider property taxes, homeowners insurance, heating, regular maintenance and upkeep, the potential remodel costs before settling in to get a house updated, etc.

Tax Advantages – Mortgage interest is actually deductible and shave a fair amount from your tax bill, but this benefit accrues mostly to higher income earners with a larger mortgage payment.  You may not be able to save with the deduction.

Another thing to consider is that paying off a mortgage is a kind of forced savings.  When you write a check, you lower the balance you owe while the value of your property holding increases.  Renters might save on monthly expenses in some major cities, but if you’re renting you have nothing to show for the monthly payment in terms of savings or value.

The NYTimes has a great interactive graphic/calculator to help determine if renting or buying is better for you.  Check it out here

If you want more information on your own situation and whether or not buying is the right move for you, contact me today to discuss your option.