Whether you’re buying your first home or your 10th investment property, the real estate transaction process can be scary and rife with concerns. Am I paying too much? Will this property at least hold its value? How can I be sure this is a good decision? Well, as with any investment, you can never be absolutely sure your making the right decision until you have the payoff in the bank; however, the real estate market has historically shown positive long term gains. Combine this with the historically low interest rates for home loans, the low down-payment options available through FHA and the increased loosening of mortgage lending standards, and home ownership is becoming more viable (and ultimately more profitable) for many people. According to a report recently released by Trulia, St. Louis is at the #10 spot on “Where Buying a Home is a No-Brainer” list! They show as of winter 2014, it’s 54% cheaper to buy here than rent. Trulia looked at homes for sale and for rent in the metro area, and calculated the average rent and sale price across all listed properties. They then factored in the total costs of homeownership, such as closing costs, maintenance, insurance, taxes, etc., and the total costs of renting, such as renter’s insurance and security deposit. Using these numbers (and assuming a 4.5% 30-year fixed rate mortgage with 20% down), they found the average monthly rental cost to be $1,251, while the average monthly cost of home ownership to be $593! That’s an incredible difference! Further, they found interest rates would need to top 17.7% before renting would become cheaper than buying.[i] Current interest rates are hovering around 4%.
Let’s look at the numbers another way. According to the Federal Reserve Bank of St. Louis, the median sales price of an existing home in January 2015 in the Midwest is $184,200[ii]. With a 20% down-payment (at 4.5% interest), your monthly mortgage payment is approximately $745/month. Of course, taxes and insurance will need to be factored into your total monthly obligation, but the point is still valid. In St. Louis, it’s cheap to buy a house! Compare these numbers to the average 2 bedroom apartment renting for $814.[iii]
St. Louis Real Estate Search released the following chart as of March 6, 2015. As you can see, for approximately the same monthly cost as the 2 bedroom rental, you can own a 3+ bed, 2 bath house!
A 20% down-payment can be quite a financial hurdle, but there are currently many available financing options to assist, such as: FHA, VA, or conventional mortgages. Talk to your lending specialist to see what you qualify for and would best fit your situation. FHA loans only require a 3.5% down-payment and have looser credit score requirements.
All things considered, this is a great time to buy a home in St. Louis. The market is strong, home prices are low compared to the cost of renting, and the opportunity to build wealth through equity in your home is real. As the real estate industry is continuing to regain steam lost from the financial crisis of 2008, now is the chance to buy the house of your dreams at still deflated costs. Demand for homes across the nation is growing, the economy is starting to improve, and rates are still at the lowest levels ever witnessed. Whether you’re thinking about buying or selling for yourself or as an investment, call or email me to today to start looking for that perfect house.
[iii] http://www.deptofnumbers.com/rent/missouri/st-louis/Type your paragraph here.
Why Buy in St. Louis?