If you live in Fort Collins or are considering a move there, you may be asking yourself that age-old question: is it better to rent or buy a home in Fort Collins, Colorado? After a historic couple of years for the real estate market, there are many factors that contribute to this conversation. And the short of it is: it depends — on both your financial picture and your goals for the future.
But let’s examine some of the important pillars that will help you decide if owning a home in Fort Collins is for you — plus, a few specific questions to ask yourself when weighing the pros and cons.
And ultimately, we have a team of expert brokers who can assist you with this personal decision!
This home is for sale here.
It’s no secret: fueled by low inventory and low interest rates, the competitive market has driven home prices higher and higher, which can be less than motivating for would-be buyers. In 2021, we saw a median home price of $535,000 in Fort Collins, which was a 17.3% increase from the previous year. And in 2022, we predict a median home price of $550,000 — and we don’t expect the upward trajectory to fall any time soon.
While this may seem hopeless if you’re looking to get involved in the market, it just makes now the best time to do so! The market in Fort Collins is strong and somewhat predictable, which makes it a wise investment in the long run.
At the same time, rent prices are also steadily rising. And rent rates are something you have no control over! Your landlord can simply choose to raise the price when you renew a lease — and you have no choice but to pay up or move out. According to Best Places, the average rental price in Fort Collins is $1,947, which is more than the national average of $1,681. And that number is steadily going up year after year, as landlords are raising prices to keep up with the market.
This brings up another point: you may want to be the one benefiting from these rent increases! In other words, you may choose to rent out your home down the road, which means you can have tenants pay your mortgage (and then some) each month.
Graph Courtesy of Macrotrends
You may have heard! The record-low interest rates we experienced during the pandemic (dropping as low as 2.65% for a 30-year FRM in January 2021) are starting to pick back up again. But don’t worry — they are still relatively low in the grand scheme of things. Just take a look at the history of rates, which shows 8.25% in January 2000 and a whopping 18.44% in October 1981.
But, as mentioned, we expect to see a few interest rate hikes throughout 2022, which means you may want to get in at the current rate!
Sure, rent prices may be lower than your expected mortgage, but in the long run, which puts more money in your pocket? As a real estate company, we are pretty passionate about the many financial benefits of homeownership — and there are many, including building equity, stability in payments, an increased credit score, and tax deductions.
When you rent a home, you are handing over money to your landlord on a monthly basis that you will never see again. But when you pay your mortgage bill as a homeowner, you are slowly owning a little more of your home each month. Your equity increases in two ways: 1) as the value of your home goes up over time and 2) as you pay off more of your loan each month. This is why it makes more sense to buy a home if you are planning on living in it for longer than a few years!
Beyond the obvious financial benefits, there is one equally important factor to consider. It is easier to put down roots in a community when you own your home — as you plan on staying put for a longer period of time than a 12-month lease. In fact, studies have shown that those who own their home are more likely to get involved in their community. This might mean volunteering with local organizations, joining meet-up groups, getting involved in elections, or simply making an effort to get to know their neighbors.
Before you make a decision, you’ll need to ask yourself a few questions. This will help determine the answer to your unique circumstances, from both a financial and lifestyle perspective.
As far as you can tell at this point, how long do you think you’ll live in your next home? If the answer is longer than 3 years, you may want to consider buying. But if it’s just for a year or two, renting might be the wisest decision. There are several reasons why you might need to move again soon, including a big life change like getting married, starting a family, or changing jobs. Not to mention, if you’re new to the city, you may not know exactly where you want to settle down. If that’s the case, you might consider renting for 6 months or a year to feel out the area, and then make a decision about buying when your lease is nearing renewal.
This is perhaps the most important factor to consider, because buying a house is one of the biggest investments — if not the biggest investment — you will ever make in your lifetime. Would the estimated down payment place a significant financial burden on you and your family? Would you be able to afford the estimated monthly mortgage payments? What about closing costs? Make sure you are able to take on these costs before you jump into homeownership.
One of the best ways to learn more about your financial status is to meet with a trusted lender. The team at Group Mortgage is equipped to walk you through the process of getting pre-qualified. And in the meantime, you can use their Payment Calculator to determine just how much house you can afford. Once you input your information in the calculator, you also can see your estimated “cost of waiting,” or how much you might lose if interest rates increase.
At the end of the day, it’s clear: there are some risks associated with homeownership, like the possibility of your home depreciating or the market taking a turn for the worse. However, as we’ve outlined, there are so many benefits associated with owning a home. You just have to ask yourself: do the benefits outweigh the risks? With ownership, there is the possibility of great reward, from both a financial and lifestyle perspective. You just have to be willing to take a risk in order to reap the many, many benefits associated with owning your own home.
If you’re looking to buy a home in Fort Collins or elsewhere in Northern Colorado, we can help! Our brokers are extremely knowledgeable about both the buying/selling process and the nuances of the local market.