Observing current prices of housing as well as the cost of renovating and upgrading older homes and those places that have been neglected and in need of TLC, could renting be your best path to pursue in 2022? It all depends upon your specific financial and personal situation.
There are many questions to be asking yourself, one being will you be staying put at least five years in the place you want to purchase? Will all the tax deductions, potential appreciation, costs to own, lifestyle, current and future financial position be strong enough with your job and/or business? For the past 18 months the Covid pandemic has had a huge, devastating impact on earnings. Many jobs and businesses, especially restaurants, travel, and hospitality were shut down and many closed forever.
People who had bought homes in 2019 were affected tremendously and could not have possibly anticipated what was coming down the pike. How many homeowners had at least 6-12 months worth of additional savings to weather the pandemic storm that would throw a financial curveball to their job and/or business? This should always be a standard item on the list of crucial things to consider when buying unless your job or business is guaranteed, which most are not!
Some buyers went into the purchasing mode on a shoestring with the Covid hysteria and the lure of the historically lowest rates drew many to leave major cities for more space with the ability to work from home. However, as mortgage bailouts and forbearance programs are ending, foreclosures surged 32 percent in the third quarter and were 67 percent higher than the third quarter of 2020, according to CNBC. But due to greater increased equity accumulation in the majority of properties over the last 10 years, this provides options to either work out something with the lender or consider selling.
For those who are considerably astute, smart, and disciplined investors, putting the difference between the costs of ownership, (mortgage, taxes, repairs and upkeep) and renting into another type of investment, e.g., consumer staple stocks, emerging markets abroad, metals,(silver or gold), cryptocurrencies or a business that they have worked in with years of experience may potentially do better financially. The bottom line is it’s all about diversification and realizing your risk tolerances.
I am not a certified financial planner or a CPA, so I cannot offer any advice. However, my suggestions should be discussed with your CFP or adviser and CPA who will provide guidance. Renting can provide the flexibility of being able to move as long as a short-term lease is signed or you may not be concerned with leaving before your lease is up. However, the landlord would have legal grounds to try to collect the additional rent due as per the lease.
The halt to evictions and foreclosure actions for millions was supposed to expire at the end of December, but President Biden has extended the moratorium on foreclosures and evictions until Jan. 31, 2022, and maybe it will be further extended for those who have a lease assuming that they qualify after filling out a CDC Eviction Declaration Form and provide it to their landlord. The form certifies that you have been specifically impacted by the Covid-19 pandemic and have pursued all other remedies to no avail.
There are also income requirements for single renters who have earned less than $99,000 ($198,000 for couples) in 2020 or received a stimulus payment. Also, renters who were not required to report income in 2019 to the Internal Revenue Service were also exempt from eviction and foreclosure. Here is a link to a site that will provide an enormous amount of clarity and information as to available options on forbearance, foreclosure actions, and evictions: https://themortgagereports.com/69687/cares-act-mortgage-forbearance-ending-what-to-dos
A survey done with the major banks and lenders revealed that they are not considering foreclosure actions after forbearance ends. The lenders are also aware that so many have positive equity in their homes and will not abandon and leave their homes as they did in the market implosion of 2008. The majority of homeowners have a viable option to sell as opposed to going through a foreclosure action, which can only start when 120 days in arrears on payments.
Renting or staying where you are just may be the only viable option for you as prices have increased beyond the reach of many. As prices continue to rise, but perhaps by only single digits over the next one to two years, more people will continue to leave the expensive markets, like New York, for other states like Florida and Texas where the cost of living is considerably. Some of these locales have no state income tax and provide the benefits of a lower cost of living and a more stress-free lifestyle for millennial and Generation Z groups.
Happy New Year to all my clients and friends and to a happier, healthier and lucrative 2022.
Philip A. Raices is the owner/Broker of Turn Key Real Estate at 3 Grace Ave Suite 180 in Great Neck. He has 40 years of experience in the Real Estate industry and has earned designations as a Graduate of the Realtor Institute (G.R.I.) and also as a Certified International Property Specialist (C.I.P.S). For a “FREE” 15 minute consultation, a value analysis of your home, or to answer any of your questions or concerns he can be reached by cell: (516) 647-4289 or by email: [email protected] Just email or snail mail (regular mail) him with your ideas or suggestions on future columns with your name, email and cell number and he will call or email you back.