Portland’s Insane Rental Market: 5 Reasons to Buy
Opt Real Estate
Increasing rent prices in Portland have led renters to evaluate whether renting long-term is in their best financial interest and how to go about purchasing a home sooner rather than later. Adding to the urgency to leave the rental market are new rental laws that will take effect in 2023.
Starting January 1, 2023, Oregon landlords are legally allowed to increase rent by up to 14.6%. This is an increase of 4.7% from the 2022 cap of 9.9%. With the average rent for a 1-bedroom apartment in Portland already approximately $1,500 per month, the new increase could raise that average to over $1,700 monthly, costing renters an additional $2,600 in annual rental costs.
In light of this new law and the costs of being a long-term renter, here are five reasons why buying a home can help you avoid further losses in the rental market.
1 – A balanced housing market
According to a recent Altos Report, the housing market in Portland has shifted from a seller’s market to a more balanced market as of October 2022. This is great news for buyers, as you are likely to save thousands of dollars on your house’s price as this trend continues.
Home prices are coming down and houses are staying on the market longer. This gives potential homeowners longer to submit offers and more breathing room in the buying process.
2 – New ways to save for a down payment
In addition to reduced housing prices, newly expanded options regarding tax-free financial gifts further add to the incentives for renters to buy into the market.
Mortgage giant Fannie Mae has expanded the “Bank of Mom and Dad” to include many new people who can help buyers afford a mortgage. Tax-free financial gifts to be used towards a down payment can now come from any relative, a domestic partner, a fiancé, a former relative, or a relative of a domestic partner.
Before this law, cash gifts for down payments were only permitted from one’s parents, making this new law a potential opportunity for prospective homebuyers to buy into the market sooner.
3 – Start building equity
Even as the housing market has cooled recently, the rental market is still extremely hot. This is good news for landlords – and bad news for renters.
When you own a home, your monthly mortgage payments go toward building your equity. When you make rent payments, your hard-earned money goes toward building your landlord’s equity.
Equity is the current market value of your home; minus the amount you owe on your mortgage. Your equity represents the portion of your home that you actually own. As you pay down your mortgage, your equity will continue to increase.
Similarly, as the market value of your home increases, so will your equity. Essentially, this allows your money to grow and work for you while you do virtually nothing. Your equity can then be used to borrow against in the future or to turn a profit if you sell your home.
As a renter, your money pays your landlord’s mortgage, which directly benefits the landlord – not you. Whether you rent or buy, you must make a monthly payment. So, why not let your money work for you instead?
4 – Tax benefits
When you own a home, you are eligible for certain tax deductions and credits. Tax deductions help homeowners reduce financial liability with tax breaks on mortgage interest, home equity loan interest, property taxes, mortgage insurance, specific home improvement projects, and home office space. When you rent, your landlord is the one who receives these potential tax deductions and benefits.
Additionally, once you own a home, if you itemize your taxes, you can deduct mortgage interest paid on federal taxes. In the early years of a mortgage, almost all the interest is paid, so the savings can be significant. For example, a $200,000 mortgage at 5% equates to roughly $9,000 in interest.
5 – Fixed rates and refinancing
While your rent can increase yearly, mortgage payments remain the same if you have a fixed-rate mortgage. During the term of a fixed-rate mortgage, your interest rate also stays the same. Best of all, a mortgage of this type will not be affected by market fluctuations.
Also, keep in mind that while interest rates are high right now, refinancing may be an option down the road. Refinancing can lower your fixed interest rate and thus reduce your monthly payments.
Don’t put homeownership on the backburner – talk to an expert
Before you decide whether you are ready to buy a home or not, it is important to talk to an expert broker that has an accurate pulse on market fluctuations. Connecting with experts that are knowledgeable about the Portland housing market will help you avoid misinformation and make better decisions about your best next steps.
You may be closer than you realize to your goal of making a down payment and owning a home. A trusted team with market expertise, including a knowledgeable lender, will guide you based on your current needs and financial situation. We can put you in touch with some excellent leaders who can help you create a game plan.
Even if your dream home is 6-12 months out, you will be ahead of the curve by taking steps to ready yourself now. Connect with an expert before you write off your chances of owning a home in Portland any time soon.
Led by the Oregon REALTORS® 2022 Realtor® of the Year, the professionals at Opt Real Estate have a reputation as a top company in Oregon and southwest Washington. For more information about Opt Real Estate, please visit www.theopt.com.