With rising rents, more renters in Orange County, California are being swayed into home ownership, even in pricey housing markets like Newport Beach, Irvine, Corona Del Mar, and Tustin Ranch.
For example, one Newport Beach renter said she started looking into owning a home when his landlord tried to increase his rent by 14 percent when his lease was up for renewal. She found that she could buy a home and get the same amount of space for cheaper than continuing to rent, plus she’d be building equity.
Other renters are starting to see that buying may be a better option for them, too.
Rents are increasing at about the same pace that home values are dropping, says Stan Humphries, Zillow’s chief economist, who says, according to their surveys, home prices have dropped 3.1 percent year-over-year whereas rents have increased 2.5 percent.
"Herein lie the seeds to eventually more interest in buying on the part of consumers, which will help put a floor under home prices," Humphries told Investors Business Daily. Recent housing surveys, including Zillow’s, are showing home prices are starting to rise in recent months.
Affordability in housing has been at record highs from the combination of falling home values and record-low mortgages. Humphries says that housing prices have rolled back to 2003 levels.
"That increased affordability in the face of rising rental prices will begin to get buyers off the fence this year,” Humphries says. "What’s been keeping buyers on the fence is a crisis of confidence. People who don’t have a job, or who are worried about losing their job, don’t buy homes. They also don’t want to buy an asset they think is rapidly depreciating.”
National Association of REALTORS®’ Chief Economist Lawrence Yun says the tighter restrictions from lenders are also preventing many potential buyers from securing financing in order to buy. But for those who are able to qualify, Yun says “it’s better to get in now” than wait.
Source: “Rising Rents Prompt Buys, May Help Housing Recover,” Investors Business Daily (May 10, 2012)