“The rental market used to be and should remain a steppingstone to homeownership. But given how widespread rental affordability problems have become, the rental market could be acting more like a barrier to buying,” according to Stan Humphries, chief economist with online Real Estate resource Zillow.
If you are currently renting, or trying to, in the Metro Denver housing market, you’ll want to read this Denver Post article in full.
Rents are on the rise nationwide, with an average increase across the U.S. of 3.3 in January, according to the Zillow Rent Index. (zillow.com) Compare that number to Denver’s January average rental price increase – a whopping 10.2%, and its no wonder making ends meet as a renter is harder and harder to do across Denver.
So what is a cash strapped renter to do if he/she/they hope to become a homeowner in the foreseeable future and wave goodbye to annual rent increases?
- Consult a mortgage credit professional. If poor credit, lack of credit, bankruptcy, foreclosure, short sale, bad debt or other credit-related issues are keeping you from purchasing a home, there are experts who can give you straight answers on the state of your credit, provide you with a realistic timeline for when you will be able to qualify for a mortgage, and actively assist you in cleaning up your credit scorecard. But don’t rely on Google to find you a professional you can trust – ask a licensed Realtor or mortgage expert for a referral on this one.
- Consider earning additional income in order to save for a down payment. Rental rates are increasing significantly faster than wages, and this does not put goal-oriented renters in a good position to save for a down payment on a future home purchase. If your current cash flow situation does not allow you to contribute toward this goal, consider finding a side job or advertising your marketable skills for hire including house painting, yard work, tax preparation, child care, etc. The sacrifices and hard work you put in now will pay dividends later in the form of your own home and all the benefits that come with property ownership.
- Invite a roommate to share expenses. If you are a family renting a home with a finished basement or extra bedroom, a single or couple in a two bedroom, or a couple of bachelors with space to spare, consider renting your additional room or space to offset rising expenses. The cozier quarters you deal with now may yield your own square footage sooner if the savings lets you contribute more to a down payment fund.
- Do your research, and be willing to relocate to an area with more affordable rents. Not surprisingly, Aurora is the suburb with the most affordable rent in our area at a median rate of $850 for a 2 bedroom apartment. Broomfield, on the other hand, is tipping the scales at an median rate of $1480 for a similar unit. If you are able to commute to where you work, broaden your apartment search to include areas with lower average rental rates. Set the savings aside toward the future, more ideally located home you’d like to purchase.
- Be disciplined, but be realistic. Just like a crash diet, crash budgeting for your future home purchase is unlikely to produce long term success. Find ways to ferret out a few extra dollars a week, but don’t cut back on every joy in life, or your dreams and goals will quickly feel like a chore and you may give up. If you want the security and long term cost savings of living in your own home, you may have to forego luxury vacations in lieu of long weekends in the mountains for a couple of years, but you don’t have to live like a pauper to achieve your goals.
Find ways to cut back, find ways to earn more, make sacrifices you can live with – and consult a Realtor and experienced mortgage pro. Homeownership can be more than a dream – but it helps to have a plan to get there.
Want to chat about the ways to work toward your own home purchase? Drop me a line – I’m here to help.