Buying Cheaper than Renting
Currently home ownership is still 38% cheaper than renting, though the gap is narrowing. Some analysts estimate that interest rates will need to reach 10.6% before the gap closes. This is a national average, and it varies considerably in local markets. In Honolulu, it’s just 5% cheaper, while it’s 66% cheaper than renting in Detroit.
Subprime Lending Back on the Scene
A group of small lenders are bringing subprime loans back into the mortgage market. These loans are being offered to buyers who pose a credit risk, typically those with credit scores below 640. They’re not cheap loans though. Interest rates are as high as 8% to 10%, and down payments are required to be in the neighborhood of 25% to 35%.
Home Buyers Priced Out of the Market
Home buyers in big cities around the country are facing bidding wars and high home prices. In cities like San Francisco, Las Vegas, and San Diego, prices have climbed as much as 20% or more in the past year.