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    • To buy or to rent, that is the question

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      Americans shelling out cash for rent might want to reconsider their stance on housing. Rental rates continue to climb throughout the country, and renting a home is now only half as affordable as buying a property, according to a recent report from Zillow.

      Stan Humphries, Zillow's chief economist, said homeowners who can afford a down payment might want to get in on the action.

      "Despite rising home values, homeownership remains very accessible for buyers that can scrape together a down payment - even if that down payment is relatively modest - find a home to buy and secure financing," said Zillow Chief Economist Dr. Stan Humphries.

      Renters across the country could expect to dole out 30 percent of their monthly income on rent during the third quarter of 2014, Zillow stated. However, homeowners during that time were spending roughly 15 percent of their monthly incomes on their mortgage loans.

      Demand for apartments isn't slowing
      Ingrid Gould Ellen, the faculty director of New York University's Furman Center, told The Wall Street Journal rental costs are going up because demand for apartments is climbing at a torrid pace.

      "As the number of renters grow, if the supply of rental housing does not keep up - as it has not in most of these cities - then vacancy rates will fall, rents will rise, and more renters will struggle with the costs of housing," Ellen said.

      Affording a down payment
      The average going rate a lender wants a borrower to have for a down payment is about 20 percent of the home's cost. So if a house costs $300,000, a buyer would need $60,000 for a down payment. But many buyers don't even have that much when they seek a home loan, according to financial adviser Mark Gravelle.

      Gravelle told Nooga.com that stringent lending policies forced on borrowers are slowly starting to loosen up.

      "Very few buyers come to us with 20 percent to put down on a house, and that isn't a problem at all," Gravelle said. "There are loan products with zero money down with some income and location restrictions."

      Nooga.com reported the area one wishes to live in can play a deciding factor in choosing to rent or buy. In a metro area like Chicago, for example, purchasing a property in a hip location might be too expensive for many would-be buyers.

      But even renting in the suburbs can be a serious financial obstacle. Crain's Chicago Business reported suburban rents have increased five straight years and don't appear to be slowing anytime soon.

      The source stated many people held off on buying a home during the aftermath of the Great Recession. Although the job market has improved recently, the added demand for housing - many millennials are finally able to leave the nest - has allowed landlords to hike rents.

      Jed Kolko, chief economist at Trulia, told the Journal that saving enough money for a down payment is the biggest barrier most prospective homebuyers face. He said saving for a down payment becomes that much harder when a substantial amount of monthly income goes toward rent.

      The median rent in the Chicago suburbs increased $1.29 per square foot during the last three months of 2014, which is up 4.7 percent from the previous year. Looking at a five-year span, rents have increased 21 percent.

      Will the government help borrowers?
      Ron DeVries, vice president of Appraisal Research, told Crain's Chicago Business the government might be able to spur homebuyers from the sidelines.

      "Could this turn in a year or two? Sure, depending on what the federal government decides to do," DeVries said. "If they change the rules of the game for lending, that could certainly put more people back in the for-sale market."



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