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Home Prices Gain, But Rents Rise More in Most Locations
|Rent gains are outpacing home price jumps in many areas.
Tuesday, July 10th, 2012
Recent real estate news has focused on home prices showing improvements in many parts of the country. However, in many of those locations, rents have increased even faster, making it more affordable to buy than lease for some consumers.
According to data collected by Trulia in June, the asking prices on for-sale homes increased 0.8 percent over the past quarter and 0.3 percent over the past year. By comparison, rent prices in the 25 largest rental markets nationwide have increased 5.4 percent over the same 12-month period.
"We saw asking prices start to rise in February and predicted that other home price indexes would report sales price increases this summer for those homes - and they have," said Jed Kolko, Trulia's chief economist. "Since February, asking prices showed solid gains in four out of five months, including in June, so I expect to see the sales-price indexes show further increases in the months to come."
Florida real estate market not immune
While home prices in many areas, such as Miami, have increased far more than in other parts of the country, rents have spiked as well. Trulia said while asking prices in Miami have increased 16.1 percent over the past year, rents have also increased more than 10 percent, limiting the advantage.
Low rates magnify opportunity
The rising rent prices make it even more advantageous for those looking to take seize the low mortgage rates currently in place across the country. The latest data released by Freddie Mac found that the average rate for a 30-year loan was just 3.62 percent.
That mark is down nearly a full percentage point from a year earlier, when rates were already being trumpeted as exceedingly low when they averaged 4.6 percent.
The advantages buyers can gain from these prices are significant. A $300,000 loan with the latest average mortgage rate would carry a monthly payment of less than $1,400. However, the same loan issued in July 2008 - when rates averaged 6.43 percent - those same payments would be nearly $1,900. Over the course of a 30-year loan, that adds up to roughly $180,000 in interest payments.