The real estate market is booming in the United States, especially in select areas of California and Las Vegas. Even the sleepy city of Boise, Idaho, is experiencing unprecedented primary residential development. Wherever you live, you’ve probably noticed that it’s not so easy to get into that coveted home you’ve always dreamed of, despite favorable mortgage rates. So what should I do?
Lessons learned from the past
With so much uncertainty surrounding the housing market, it may be best to avoid owning your own property. Many of the so-called experts predict that the housing market in the US has finally reached bubble state and they expect the bubble to burst in the near future. They may have submitted their predictions a bit earlier, but their advice should be heeded. If we learned something from the stock market bubble and the subsequent crash of 2000, we realized that a conservative approach to investing often serves us well when uncertainty surrounds the market.
Protect yourself and consider the advantages of renting or leasing versus buying your own home. A tenant takes much less risk by signing his name on a lease than by closing a house. Typically, a rental agreement locks you into a contract for a short period of time, relatively speaking, during which the rental rate is also locked in. Such a contract can protect you from downturns in the housing market, especially the volatility often demonstrated by adjustable rate mortgages. Of course, as a tenant, you can’t get any equity in the house in case the market goes up. However, you are also not exposed to the violent falls in home values caused by an oversaturated market. If you buy a house now and a year later you need to move to find a new job opportunity, what happens when you find that the inflated prices you paid for your house are not so inflated anymore, and all of a sudden you owe more on your what house is it? to worth? That’s called negative equity, and you instinctively realize that nothing good can come out of such a situation. Therefore, the rental offers flexibility, both financially and physically.
Avoid property headaches
By agreeing to only rent the home, you manage to avoid many of the disadvantages associated with owning a home. Normally the landlord is responsible for the general maintenance of the apartment. Many homeowners are quick to tell their stories of frustration, disappointment, and even anger when things go wrong in the home. Pipes break, floods occur, air conditioning units break during the scorching summer days of July, and heating systems fail in the dead of winter. All of these things can and will happen, considerably slowing down homeowners. Therefore, as a tenant, you can avoid many of the major financial investments that homeowners must make to maintain the comfort and livability that a home provides. Accepting a lease helps mitigate the risks of living in a house or apartment.
Weighing your options
A rental or lease agreement can offer many advantages to those looking for a place to live. Ultimately, each individual must decide what is right for them. Some are more than willing to take the risk inherent in the housing market because they have strong positive cash flow and are in a position to withstand the twists and turns of the market.
Don’t be afraid to weigh your options and consider the risks of owning or renting. For many, playing the game conservatively and waiting for house prices to drop to Earth will prove to be a successful strategy. There is no shame in signing that lease, living in an apartment for a year or two before moving into that house you wanted so much.