Rent Trap Stopping First Time Boston Area Homebuyers

First time Boston area homebuyers are in a trap they can’t seem to get out of, and it’s called a “Rent Trap.”

First time Boston area homebuyers seem to be caught in a rent trap they cannot get out of.

Everyone has pretty much come to the conclusion that interest rates won’t stay low much longer, and home prices continue to rise. New three percent down programs from Fannie and Freddie sweeten the deal for new buyers. FHA’s mortgage insurance premium cut makes FHA affordable again. Incomes are up.

To top it all off, greedy landlords everywhere seem to be practically pushing their tenants out the door, with rents rising every month. Rent vs buy comparisons show renters how much they are losing by staying put. According to Reis, Inc., the average US monthly rent has climbed 14 percent in the past five years—double the rate of home price appreciation. Rents rose 3.5% last year according to Zillow, which forecasts another 3.5% hike this year. Rents are forecasted to keep rising in 2016, though record numbers of new apartment openings are expected to slow down increases to about 2 percent, according to Zillow.

Renters Not Rushing to Become Boston Area Homebuyers

In what could be considered a reverse trend, rising rents do not appear to be playing a significant role in motivating renters to become Boston area homebuyers. This contradicts what some in the housing market think as they expect more renters ought to be actively looking to purchase a home. Rising rents are primarily a sign of increased demand rather than a signal that home purchases will be increasing.

Instead of acting as an incentive to buy a home, rent hikes are keeping renters captive by siphoning off cash that otherwise might have been saved to make a down payment or pay closing costs. Even to save the 3 percent down required of the new Fannie and Freddie programs, it takes two years or more for the average first-time Boston area homebuyers to muster enough for a down payment. Every time rent increases, it’s going to take even longer to save enough to become a homeowner.

Also of Interest  Biggest Mistakes Boston Area Homebuyers Make

In the past, renters making the national median income could expect to pay about 25 percent of their income on a typical apartment. Today, renters should expect to spend roughly 30 percent of their income on the median apartment

Find more news pertaining to the recent number of Boston area home sales under our Boston area Real Estate News Section of articles to your right just below our Boston area Real Estate Categories.

We also post tips on Facebook and Twitter. Follow us there for many other mortgage related tips as well.