Home prices have risen nationally three times faster than incomes since the turn of the century, which has made homeownership an impossibility for more Americans than ever before.
In many large cities, home prices have outpaced income. In Miami, for example, incomes have risen 16 percent, while home prices have increased 58 percent since early 1998. New York’s Long Island suburbs have seen just a 14 percent rise in incomes as compared to an 81 percent increase in home prices. Boston home prices have gone up 89 percent, while incomes have increased only 22 percent.
Even with a downturn in the real estate market looming on the horizon, home sales are still headed for another record year.
The first sector to show slowing is the high-end home market. Because of “over personalized” big-ticket properties, the pace of house auctions nationwide has surged.
Low-interest rates are the only continuing positive trend of the housing market. Low rates average now less than 6 percent for 30-year fixed-rate loans, the lowest since the 1960s.
Real-estate analysts believe that if the housing market stalls, some areas will continue to grow modestly while other markets gradually go soft, rather than pop.
Should You Rent Your Home?
The thought has probably crossed your mind: if you found the job of a lifetime in another state or your current company transferred you, should you sell or rent your home? Naturally, there are many factors to weigh before making such an important decision.
First, you need to think about your reasons for keeping ownership of the home. Do you like the home so much that you want to hold on to it in case you ever move back? Are you looking for an extra tax break-through property depreciation? Do you want to use the home as a basis for retirement investment?
These are all fine reasons for retaining ownership, but there are factors to consider that may outweigh the perceived benefits. For instance, are you prepared to be a long-distance landlord, hiring someone to maintain and manage the property for you? There are many other costs involved as well, such as advertising costs, turning costs (cleaning and painting between tenants), property taxes and insurance, utilities paid when your property is between tenants, and accounting costs. In order to assess these costs, you should research the numbers in your market. Expenses often run 30 to 40 percent of income before the monthly mortgage cost.
The ABCs of Property Rental
If you’ve decided to rent out your home, where do you start? First, get the house in shape in order to get the highest reasonable rent. This includes interior and exterior patching and painting, carpet cleaning or replacement, appliance tune-up and cleaning, adequate insulation to cut down on utility bills, and fixing whatever needs fixing.
Then, set the proper rent. Location rules when setting prices. You can contact a property management company to research prices in your area, or you can look in the real estate section of your Sunday paper. If you set your price too high, it’s unlikely that you’ll find a tenant. If you ask for too low a rent, prospective tenants will wonder what’s wrong with the place.
Should You Hire a Property Management Company?
It’s not absolutely essential to hire a property manager, but it can make your life a little easier, especially if you are moving out of the area. Interview at least three different companies, and be sure to ask about accreditation, experience, customer service, references, tenant screening, vacancy rates, maintenance, monthly reporting, eviction handling, insurance, fee structure, property inspection, and any special services they offer.