Buying is a better decision than renting
Increasing prices and an inventory crunch drive more discussions about the merits of renting over buying a home. Buying is both cheaper and a better wealth-building option. Here is why.
Renting a three-bedroom home will average $1,040 out of a family housing budget. Rents in Washington and Carter counties top the most current rental affordability reports. Sullivan and the other markets are behind by only a few dollars. While the average for a three-bedroom home is $1,040, a check of ads shows the price can be as much as double.
While affordability has become more of a challenge, the bottom line is an average wage earner in the region has enough buying power to afford a median-priced home. That assessment also comes from a current third-party affordability report. For example, an average payment for a median-priced home during the first quarter of this year in Washington Co. was $642 a month – based on a 20% down payment, a 28% front-end loan-to-debt ratio, and a strong enough credit rating to get the best available mortgage rate.
How much do we spend on housing? The benchmark is spending no more than 30% on housing. Anything more is classified as housing stressed. Although the housing stress focuses on an individual or family, it also extends to the economy because if more than the target income goes to housing, less is available for services and local products. The most current report shows 25% percent of local homeowners are in the stressed category
Renters spend considerably more. The Census reports show 46.7% of renters in the Johnson City metro area spend 30% or more on housing. In the Kingsport-Bristol metro area, the number is 44.8%. Although renters have the advantage of more mobility, their rent payments are building wealth for the landlord.
Although prices have and continue to see some healthy increases, the numbers show two things.
- Buying is cheaper and a better economic decision than renting.
- The region continues to have an affordable housing market.
The biggest challenge is finding what fits the needs of an individual or family. It is different for every buyer, and it is a fiercely competitive market for buyers – one that comes with disappoints if they do not come to the market with their best offer quickly.
The current Northeast Tennessee Association of REALTORS® (NETAR) mid-month market update shows some slight improvements for buyers. They are not significant improvements, but now, sellers are beginning to market for the peak home buying and selling season.
NETAR is the voice for real estate in Northeast Tennessee. It is the largest trade association in the Northeast Tennessee – Southwest Virginia region representing over 1,400 members and 100 affiliates involved in all residential and commercial real estate industries. Pending sales, Trends Reports, and the regional market analytics can be found on the NETAR websites at https://netar.us/voice-real-estate-northeast-tennessee.