Even some veteran renters are looking at today’s Portland area housing market and wondering whether it’s time to start their home search. With prices and mortgage rates as low as they are while rents continue to move higher, the numbers point to home ownership as an ever more obvious choice.
But that’s just the quick, back-of the envelope budget equation: monthly rent vs. mortgage payment less tax savings. If this June finds you at the start of your own home search somewhere in the Portland metro area, many financial advisors recommend that you also consider another rule of thumb – you should plan to stay in your new home for at least five years.
Transaction costs are only one consideration that makes this a good idea. Here are some of the others why it’s prudent to think about the 5-year planning horizon as you conduct your home search:
Financial Safety – Homeowners need to have at least some extra liquidity: funds set aside as an emergency resource in the event of unforeseen loss of income. Affording a home and its maintenance costs should never jeopardize the financial health of your household. Liz Weston of MSN.com recently asked several experts for their calculations regarding home repairs. Their answer? Plan to spend at least an additional 1% of a homes’ value on maintenance each year.
Resale Value – The significant overhang in distressed homes will likely continue to exert at least some pressure on home values for the near future. If you need to sell your home two or three years down the road, you may come up short when all the moving, transaction, and other expenses are considered. It may be at least that long before the familiar growth in residential real estate value resumes.
Sanity – Studies have shown that moving is one of the top stresses in life (up there with death, divorce and illness). Personally, I think a well-planned move is a little less dire, but it is true that a happy homeowner is a settled homeowner. When you’re starting your home search, consider the changes coming to your family in the coming years: New baby? Child to college? If you know a move is eminent in the near future, consider finding a home with long-term rental value. Buy a home that can grow with you and you’ll find yourself much more financially secure…and sane!
The current low prices and 30-year fixed mortgage interest rates aren’t likely to last forever, and that old adage remains true: buy low, sell high. If you’re looking for a reason to start your home search in Portland now, call me for a serious look at this June’s market.