You may be like many others who had hoped to buy a home this year but shied away due to rising home prices and increasing mortgage rates. However, there’s something you should think about. According to a recent report from ATTOM Data, owning a home in the United States is more cost-effective compared to renting. The 2022 Rental Affordability Report says:
“. . . The data shows that home ownership is more affordable in a majority of the country, as it was in 2021, following another year when the benefits of rising wages and super-low mortgage rates counteracted the effects of home prices spiking around the U.S. ”
Many other professionals back this data by sharing the same opinions about renting in today’s market. In the latest Single-Family Rent Index from CoreLogic, it discusses how annual rent growth was more than three times that of a year earlier.
Molly Boesel, Principal Economist at CoreLogic, points out how U.S. single-family rents were up 10.9 percent year over year in October.
“The October 2021 increase was more than three times the October 2020 increase, and while the index growth slowed last summer, rent growth is running well above pre-pandemic levels when compared with 2019.”
What Does This Mean For Renters?
There’s no avoiding the fact that home prices and mortgage rates are increasing alongside monthly rental prices. However, if you’re a buyer searching for a home in today’s market, you shouldn’t let this deter you. Just remember that when you rent, you are benefiting your landlord’s pockets. But when you purchase a house, you are gaining equity and in turn, increasing your assets.
To dive in deeper, when you purchase a home, your monthly mortgage payment becomes a way for you to save over time. As you steadily pay down your loan and your home appreciates in value, you start to build equity. In addition, you will lock in your mortgage payment for the length of your loan (usually 15 to 30 years) and give yourself a steady and reliable monthly payment. There’s no doubt that homeownership is a straightforward path to building wealth.
If you’re considering whether or not to keep renting or if it’s the right time to buy, I encourage you to take a look at this Buying vs. Renting Chart provided by the National Association of Realtors.
“The chart shows a cost comparison for a renter and a homeowner over a 7 year period. The renter starts out paying $800 per month with annual increases of 5%. The homeowner purchases a home for $110,000 and pays a monthly mortgage of $1,000. After 6 years, the homeowner’s payment is lower than the renter’s monthly payment. With the tax savings of homeownership, the homeowner’s payment is less than the rental payment after 3 years.”
In the long run, renting takes up a larger portion of your pay and has fewer benefits than buying.
Bottom Line
If you’re asking yourself, is it better to rent or buy? Depending on your situation, there are a lot of factors to consider. Our highly experienced team of realtors is here to help you weigh your options and provide you with financing options and tips. If you’re curious to know what option might be best for you, contact our team today and we can help guide you in the right direction.
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