What stops renters from taking the leap?

 

FIRST TIME HOMEBUYERS

PART 1 OF 3

Three-part series focusing on strategies for first-time buyers

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Average rents in Hawaii double every 20 years.

 

HONOLULU ADVERTISER   April 8, 2007

 

BY LISA SCONTRAS

 

Custom Publishing Group

 

Are you part of the would-have, could-have, should-have crowd?

 

The median price of a single- family home on Oahu today is $643,500. Ten years ago it was $307,000 and ten years before that it was $190,200.

 

 

If you are still watching and waiting for the right time to jump into the real estate market, consider this:

 

An analysis of the local rental market shows a similar upward track — averaging roughly $1,000 per month rent for a single-family home in 1985, around $1,500 per month in 1995 and well over $2,000 per month today. Are you prepared for the prospect of your rent doubling every 20 years? Or might it make more sense to lock in a mortgage payment now for the next 30 years?

 

“Some people rent because they are ‘waiting for prices to fall’ or to ‘see what the market is going to do,’” says Carl P. Worthy, a sales trainer and coach at Prudential Locations LLC.

 

But they forget about all the money they’re throwing away while they wait. Worthy estimates the typical renter spends $18,000 a year — that’s $1,500 a month — on rent.

 

“Home prices would have to drop $18,000 a year just for you to break even,” he says. “And what if they don’t go down? What if they go up?”

 

When you consider that interest rates are also rising together with the tax advantages of homeownership,it doesn’t pay to wait.

 

“Regardless of whether you rent or buy, you’re going to pay a mortgage,” adds Worthy. “Whose mortgage do you want to pay? Yours? Or your landlords?”

 

Both the landlord and the tenant pay for a property. The difference: a renter does not get any of the benefits of owning. A renter is not building equity — the landlord is. After years of making payments, a renter does not own anything — the landlord does.

 

The National Low Income Housing Coalition estimates 44 percent of Island households are renters who pay approximately $1,224 each month for the average 2-bedroom rental, ranking Hawaii as having the most expensive rentals in the country.

 

“Most people don’t realize that if they can afford to rent, they can probably afford to buy,” says Worthy.  “Because the tax savings inherent in ownership will help you make your mortgage payment.”

 

According to the Homeownership Alliance, 10 million Americans will enter the housing market by 2013.  Still, some renters will be shut out due to prices continuing to rise and their lack of understanding of the benefits of homeownership.

 

Worthy says the general public is often misinformed or they may not have the most accurate or up-to-date information.

 

“For example, most people think the market went down last year — from 2005 to 2006,” he explains. “When the truth is that the median prices of both homes and condos increased in 2006.”

 

If locking in a fixed monthly payment, the ability to build equity when property values increase and the tax benefits don’t convince you, then Worthy suggests you consider the security of knowing you can live in

your home for as long as you want — no one will ever ask you to leave.

 

It’s not uncommon for a tenant to find the home of their dreams only to be forced to leave at some point due to a death of one of the owners or a landlord’s deciding to sell the property for any number of other reasons.

 

“Don’t ... repeat ... don’t wait any longer,” says Worthy. “Haven’t you waited long enough? Find out what you qualify for and get into the game. You’ll be glad you did.”

 

 

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