costs more to rent a home in many Northern Virginia communities than it does to
purchase that same home. This reversal in trend sets an interesting precedence.
The current market has seen a sharp decline in buyer activity over the past 60
days. Buyer confidence is down as fears surrounding a potential increase
in foreclosure inventory and title concerns prevent many would be buyers from
acting now. In addition, many folks have been through foreclosure and
short sales and are now part of the rental/tenant market place. This is
driving demand for rental units up. Many would be buyers are waiting to
see what happens after the first of the year and foreclosure moratoriums are
lifted, they are opting to rent instead of committing to a purchase at this time.
The threat of rising interest rates has not sparked buyer urgency. Rental
inventory and purchase inventory are both low. The rental rate on a one
car garage townhouse in Piedmont or Piedmont South is around $1700 per
month. The same unit would sell for an average of $250,000. The
PITI on this unit at 4.25% FHA would be roughly (after 3.5% down payment) $1500
per month. Excluding mortgage interest tax deduction, there is a savings
of $200 per month to purchase over leasing a home. Add in the mortgage
tax deduction and the savings for buying a home now are dramatic. Why
would a person be willing to pay more to rent versus purchase a home?
Many would be buyers are opting to rent in many scenarios since they are
concerned that the market will continue to decline. These would be buyers
are willing to pay a premium to rent a home instead of risking the loss of
principal on their primary residence. The next group to watch will be the
long term real estate investor. They will now have the luxury of purchasing
a home and having positive cash flow from day one. This market is once
again on edge, there is pent up demand, and artificially delayed supply.
Once the current market constraints are lifted, we should see a surge in buying
There are so many great choices for home buyers these days. Here are a few of our current clients' favorites! Have a favorite area of Northern Virginia? Feel free to let us know. We may include it here soon as well!