U.S. home ownership is falling. As more people rent, buying a home has become cheaper than renting in most major U.S. cities. Image: CC Sugar Pond/Flickr

U.S. home ownership rates have fallen back to 1998 levels as more Americans are choosing to rent rather than buy a home. The drop in home ownership and rise in rental activity has made buying a home cheaper than renting in most major U.S. This unusual scenario could mean that buying a home now will bring greater long-term returns than most other investments.

U.S. home ownership rates falling

More people are renting instead of buying in the U.S. housing market, according to the U.S. Census. The U.S. home ownership rate was about 66.5 percent as 2010 ended, down from 67.2 percent at the end of 2009. The substantial drop in U.S. home ownership in the fourth quarter — 30,000 households — was dwarfed by the 1.1 million increase in renters. It has been widely known that falling home prices are keeping people from buying homes. Unemployment and shaky job security are another reason, as well as strict credit standards for mortgage loans. But Amy Hoak at MarketWatch suggests that people may be choosing to rent simply because it fits their lifestyle, instead of buying a home seeking a return on investment.

Buying cheaper than renting in most major U.S. cities

Ironically, the trend toward renting has made it less expensive to buy a home in 72 percent of the biggest cities in the U.S. The housing crisis has flooded the rental market with millions of homeowners. According to RealtyTrac Inc, a record 2.87 million homes were in default, repossession or at auction in 2010. People forced from their homes contributed to sending apartment vacancies in the U.S. to a two-year low. By comparing median rent on two-bedroom rentals with the median home sale price and ownership costs, Trulia Inc. determined that renting costs less than buying in only four major U.S. cities: New York, Seattle, Kansas City, Mo., and San Francisco.

Now is the time for renters to consider buying

Renters who have been waiting to buy a home may want to act now, according to Jim Woods at Investorplace. The inventory of homes for sale has been steadily going down, and prices may be on the verge of bottoming out. Mortgage rates are starting to rise and will continue as the economy improves. Plus, inflation will eventually return to normal, and investing in real estate has historically been one of the best hedges against inflation.

Sources

MarketWatch

Bloomberg

Investorplace.com

What options are left when you need money now and don’t want your credit pulled? Have you considered payday loans?

Pleasant dwelling with payday loans

Payday loans can provide a fast solution to your problem. These payday advance loans can help you avoid having your credit checked. You can get the money you need and pay it back over a short period of time. Because there are generally no credit check required for these loans, you can get fast approval in no time and focus more on moving into your dream home. Typically, all you need is to have a job, a bank account and be able to prove you are a U.S. citizen who is at least 18 years of age.

Payday loans have other advantages

Even if you aren’t buying a home, you can still get payday advance loans for other emergency expenses, like car repairs and utility bills. If your credit isn’t where you would like it to be in order to qualify for a bank loan or credit card, rest assured knowing that it won’t affect your chances of approval with almost all types of payday loans. The application is quick and easy, you are not required to fax in paperwork or fill it out and bring it in the next day, approvals are quick and the money will be deposited directly in your bank account in just a few hours, in most cases.

Don’t let your credit get dinged with every credit application you put out, especially if there is a risk for a denial. Stop looking for solutions to your money problems or give up on your dream house, because if you have read this far, you already found your answer.

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Buying Your First Home

Buying a home is an exciting time, but it can be a bit nerve-wracking – especially if you’re a first-time homebuyer. The following guide will give you a rough idea of what to expect throughout the process:

Your First Steps

• Determine how much mortgage you can afford.
  Buying a home isn’t just substituting your rent payment with a mortgage. Spend some time looking at your budget to see how much you can afford to spend on housing each month – just don’t forget to include things like taxes, homeowner’s insurance and a separate savings fund for major home repairs you may need down the road.

• Get pre-qualified for a mortgage.
  Before you even start looking at homes, you’ll want to sit down with your banker or a representative from a mortgage lending company to get pre-qualified for a loan. Basically, the lender will review your finances and determine how much of a loan they’re willing to give you. Knowing this number will help you narrow down the houses that will fit within your budget.

Moving Forward with the Home Buying Process

• Choose an agent.
  As a first-time home buyer, going at it alone can prove overwhelming. Look for an agent who’s familiar with real estate trends in the area and who has the necessary connections to get you into the home of your dreams. This is a major decision, so don’t make it lightly!

• Begin Searching for Homes.
  Yes, this is the fun part – the one you’ve been waiting for since you started thinking about buying your first home. Your agent will help you narrow down the pool of available homes, but you’ll still need to visit each home for a tour. Throughout this process, take careful notes and plenty of pictures to use when coming to a final decision.

The Final Stages

• Make an Offer.
  Once you’ve chosen your ideal home, your agent will help you prepare your offer. He or she will determine a good starting point for your price negotiations and will present your offer to the seller’s agent. If the offer is rejected, your real estate agent will help you to figure out your next steps, whether it’s submitting a new offer or moving on to another home.

• Wrap up the Process.
  Even after your offer has been accepted, you still got work to do. Throughout this period, you’ll need to complete a home inspection and follow up on your closing paperwork. In these final steps, your real estate agent will be an invaluable resource in keeping track of all the paperwork that’s necessary to complete the purchase of your first home.

Finding the Right Home

Of course, the home buying process rarely proceeds according to these six, straightforward steps. As you move forward, you may run into complications, such as a rejected bid or a failed inspection. However, with the assistance of a qualified real estate agent, it is possible to navigate these challenges until you reach your end result – a home you can call your own.

Home can be sweet whether you rent or buy

For people who’ve never owned a home, the relative cost-effectiveness of buying and renting is a frequent concern. Understanding the benefits and the risks of both options can help people make the right decisions. There was a time when buying was almost always considered to be the better choice, but today this is not always so.

Before you decide whether to buy or rent

Once upon a time, homeowners enjoyed mortgage payments that were equal to or, in many cases, less than rental payments on comparable houses. Times have changed, however, and so have rent and mortgage prices. Today, because so many factors are involved there’s little consistency to be had in answering the question of whether it’s best to rent or buy. To take just one example, in the past, people tended to live in the same home for thirty years or more. This made home ownership a wise choice for many.

Lifestyle choices

For people who work in fields may require them to relocate in the next three to five years, or for people who have goals of moving to an area where homes are more expensive, buying now may not be the best option. However, for those who plan to live for the next several years in an area where they can currently afford to buy, then buying may be the better choice. Naturally, in any given situation, the decision depends on many factors other than current market prices and job stability, but considering a purchase under these circumstances makes good sense.

Home maintenance

Prospective home buyers should also consider ownership costs beyond a mortgage, home insurance, and real estate taxes. When those costs are factored in, the cost of owning a home can far exceed the cost of renting one. Maintenance costs may include:

• Repairs
• Gardening and landscaping
• Homeowner association fees (when applicable)
• Routine maintenance (painting, cosmetic updating, etc.)
• Major repairs and remodeling

For those who wish to avoid these additional costs or who determine that they cannot afford these costs on top of monthly mortgage payments, insurance, and taxes, home ownership may not be the choice.

Tax considerations

Home ownership is often provides special tax breaks. For instance, homeowners are able to deduct the interest paid on mortgages loan from their taxable incomes. When the interest paid on a mortgage is sufficient to allow a homeowner to itemize deductions, the tax savings can be significant. Before purchasing a home, it’s a good idea to calculate anticipated tax breaks resulting from payment of mortgage interest. Homeowners may also benefit from other deductions, such as property taxes.

The final analysis

In many cases, home ownership can offer financial savings and stability. However, it’s not necessarily the best choice for everyone. When considering whether to buy or rent, each person must weigh his or her own personal pros and cons in addition to the general considerations mentioned above.

Choose the home that's right for you (Photo: flickr.com)

Is your plate big enough?

CLICK HERE if you missed part one of this article.

So think long and hard about what you need in a home, because the mortgage costs are very real. Even if you are in a dual-income family, with both at the average income, the average home and average mortgage are hard to swallow. If you’re looking at a larger, nicer home with all the amenities in a more desirable part of the country, $300,000, $400,000 and up can easily fill your plate and then some.

What’s reasonable to pay for a home?

You might be wondering how much is reasonable to spend on a home. You must take mortgage costs into account. This is a difficult question to answer precisely, because everyone’s situation differs, from income to debt to living and purchasing preferences. For each person you ask, you’ll likely receive a different answer. However, try something like this and see how it works:

1. The cost of your home should be no more than three times your annual salary. Thus, if you earn around the average of $35,000, a $105,000 should be well within your price range. That won’t net you a new home anywhere, but if you shop well, you may be able to find a nice older home in a good neighborhood.
2. Consider the burden of debt you currently have, and how long you expect to take to pay it off. Whether it’s student loans, credit cards or anything else, you have to take everything into account. Mortgage costs aren’t something you can simply take on and assume you’ll be able to “make it fit” within a sketchy budget. See how all the puzzle pieces fit together. Be honest and do your homework, no matter how much it hurts.
3. Consider the lifestyle you want to maintain. If you’re single, do you need a massive home? If you’re looking for space for a family, does each child need a separate bedroom, or can you double up and save when possible? Also important, do you need lots of stuff to fill your home? Downsizing one’s life can no only save money, but help you develop a more meditative personal focus that’s as good a shield against the chaotic slings and arrows of the world as anything. Free yourself from the rat race, eliminate clutter in your home and budget and see how relaxed you’ll feel. Make sure you’re patient with yourself here; a former pack rat will need lots of time and support to sweat out that all-consuming desire for stuff. Like many other delusions that plague humankind, the need for and bondage to possessions – materialism – can easily be classified as a disorder.

Make the right choice for you

Know the home you can afford and do everything within your power to create happiness within your space. In the 1977 children’s book “The Big Orange Splot” by Daniel Manus Pinkwater, suburban denizen Mr. Plumbean has the right idea about what our home should be: “My home is me and I am it. My home is where I like to be, and it looks like all my dreams.” By accepting limitations when it comes to buying a home, rather than grieving over them or attempting to overcompensate, not only will you preserve your own piece of mind, but you’ll reduce your need to dig deep into the mortgage quagmire and put yourself on track to build a happy, healthy life you’ll like to live.

Home ownership is an expensive endeavor (Photo: flickr.com)

For most people, the greatest monetary expense they will take on during their lifetime is that of buying a home. Despite the fact that mortgage costs are tremendous. From ubiquitous idiomatic expressions like “home is where the heart is” to classic exclamations the caliber of “He is happiest, be he king or peasant, who finds peace in his home” (from the famous German writer Johann Wolfgang von Goethe), we have been sold on the notion that the true way to find peace of mind and live a happy life is to invest oneself – and a large portion of one’s money – in building a home that can catch those rays of never-ending happiness like sunshine in a bottle… a 2,000-square-foot “bottle” made of wood, plaster, cement, nails and a sub-prime mortgage.

Your American Dream may vary

Aside from the boogeyman sub-prime reference, it all sounds exciting, doesn’t it? However, what many people forget when the excitement of buying/renting and settling into a new home or apartment sets in is the very real mortgage costs of paying for that brand new palace. Does your home suit you and your financial situation, or are you a stranger in a strange land, without the economic wherewithal to pay the bills and keep hold of your little slice of the “American Dream.”

Speaking of the “American Dream,” it’s interesting how the primary association most people make in their minds is material success. Novelist James Truslow Adams, who coined the popular phrase in his 1931 book “The Epic of America,” was hardly so specific. He referenced a belief in freedom that allows all citizens and residents of this country to achieve their personal goals through hard work. One of those could certainly be a big house on the hill or a beachfront manor, but for most people, aiming for the stars and missing still may land them on the Moon – where they can’t breathe, let alone afford staggering mortgage costs.

The numbers are truly frightening

Before you make the spur-of-the-moment leap into potential absurdity, where rational thought about how you’ll afford huge mortgage or rent payments is thrown out the window, strap yourself down and do some research. As of this moment (August 26, 2009), at the U.S. national average of 5.31 percent interest on a 30-year fixed-rate mortgage, a U.S. median-priced home of $210,100 actually costs $504,186. For a $250,000 mortgage where payments begin on Sept. 1 (as an example), that’s $254,816 in interest, $75,863 in property taxes, $30,345 in PMI and a $1,390 monthly mortgage payment. That doesn’t even take into account property tax and private mortgage insurance (PMI). Then you’re paying at least an additional $100,000 over the life of your 30-year fixed-rate mortgage. Add that and you’re looking at a total cost of over $600,000 for your home initially valued at $210,100.

Nearly half of the money you fork over to pay off your mortgage (which translates from Old French to “a pledge until death”) is used just to pay off the interest. This is certainly a lot more money that anyone has between their couch cushions and more than most can realistically afford in a nation where the average salary is somewhere around $35,000 per year and Federal Minimum Wage is $7.25 per hour. And keep in mind that the above rates are average. If you have less than perfect credit and are looking into a subprime hybrid mortgage – which has been oh so popular and oh so controversial lately – expect your interest rate to be much higher.

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