Renting? Here’s why you should consider buying in today’s hot real estate market.
It’s no shock that the rental market in major metropolitan areas across the U.S. have been on the rise the last several years as the bullish economy remains strong.
Chicago Real Estate is on fire, once again
Recently in Chicago, the West Loop overtook River North as having the highest density of renters in the Midwest, with a median rent of $2,700 in July 2018 according to Rentcafe. While this may still be a relative bargain compared to cities like New York and San Francisco, it’s a tough pill to swallow long-term for the majority millennial tenants. In fact, the most expensive eight rental zip codes in the Midwest are all in Chicago, with downtown Minneapolis filing in at ninth place.
Time for millennials to stake their claim
Millennials are constantly getting a bad wrap in the media. Too lazy, non-committal, entitled, without appreciation, deluded dreamers with no work ethic. While this might seem harsh, the truth is unless millennials invest more in the economy (think real estate) a shift in perspective may be slow to come. Speaking of millennials, Chicago’s West Loop boasts the highest concentration of millennial residents in the nation, with nearly 75% of consumers being born between 1983 and 2000. Yes, the term “consumer” is applicable even in Real Estate.
Millennials have statistically been long term renters in urban areas. Chicago has about 50 high-rises in various stages of construction and new buildings are ready for delivery every few weeks. Even with this influx of new and sparkling rental inventory for consumers, it’s important to revisit the benefits of home ownership, in lieu of renting. Here’s a refresher on the many advantages of owning your own abode, in case your parents haven’t reminded you lately.
Low interest rates and property prices
Despite being a little higher than last year, interest rates are still historically very low, and at a great rate to lock in a long term loan payment at.
Owning a home is a forced savings account
Every month your mortgage payment isn’t JUST paying off the interest (duh). You’re paying down your loan principle, which is equivalent to “saving” money every month by building equity in your home.
Price appreciation benefits
Historically, property prices have remained above inflation although they are subject to the whim and fluctuations of the economy. However, both stocks and real estate typically display gradual appreciation over time. The big difference between the two is the increase in home value is compounded by your mortgage, as homebuyers present just a fraction of their total purchase price as a down payment. The remainder of the balance is a bank loan and any price appreciation is multiplied by this nifty leverage.
Homeowners can take tax deductions
One permissible tax benefit of homeownership is the ability to deduct mortgage interest payments, but the perks don’t stop there. Homeowners can also deduct eligible expenses (certain energy-efficient improvements, for example) and most importantly roll the profits of a long-term real estate sale into another property purchase via a 1031 exchange, without paying any tax on the profit.
When you own you can truly individualize your space
Whether you need to tear down a wall, add barn doors to your bedroom, or re-do the bathroom to satisfy your French Country style, owning the space you live in means you have the ability to truly customize your space to your own style and preferences, without worrying about losing your security deposit to a cranky landlord.
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