Home Buying Is More Affordable Than Renting
The red hot real estate market has stolen the financial headlines over the past two years. Shortly after the pandemic began, mortgage rates dropped to historic lows and have remained near there ever since. Low mortgage rates mean that you can save thousands over the life of a home loan. These rates caused a wave of home buyers to start looking for their dream homes. Unfortunately for home buyers, home inventory also reached record lows. The sky-high demand combined with bone-dry supply has caused home prices to go through the roof. Today’s rising home prices have some home buyers hesitant, especially first-time home buyers. However, home prices are not the only things that are rising. Rents are also reaching astronomical levels. In fact, rents are surging faster than home prices in many markets. The reality is that for many it is more affordable to buy a house than rent.
Rent Is Growing More Unaffordable
Any way you slice it, rent prices are going through the roof. According to ApartmenLlist.com, rent prices in 2021 increased by nearly 18 percent throughout the year. Keep in mind that this list is a national average. This means it takes into account markets where there is no rental pressure to large markets where there is very large demand. In some markets, rent increased even more. In Boston, rents increased over 20 percent from October 2020 to October 2021. According to CoreLogic, annual increases in rent are the norm and not the exception. Last year’s meteoric rent increases were record-breaking. However, 2021 was not alone in that distinction. The last six years have seen record-breaking rent increases.
Tragically, it does not appear as if this trend will reverse anytime soon. The Realtor.com forecast expects rent prices to continue to increase throughout 2022 by at least 7 percent. Across the nation, rents will continue to increase. For this reason alone it might make sense to consider what it would take to buy a house.
The Many Advantages of Buying a House
If you are trying to decide whether it is better to continue renting or to buy a house, for many, owning a home is the more affordable route. The latest data is pretty convincing that for many markets and individuals, it is a better value to buy a house than rent. According to ATOM Data, in 58 percent of all counties throughout the country homeownership costs less than renting. ATOM Data’s numbers take a look at the average house payment on a median-priced home versus a three-bedroom rental property. In a majority of counties, rent takes up a larger portion of wages than a mortgage payment. In a purely dollars and cents comparison in terms of monthly costs, homeownership is a better choice than renting for many. Thankfully for home buyers, there are many more reasons why it is a great idea to consider buying a house.
Having a Mortgage Makes Housing Expenses Predictable
Aside from the fact that mortgage payments on a median-priced home are smaller than rent for a comparable property, there are other financial advantages to homeownership. One of them is housing expense stability. Rents increase from lease to lease and place to place. If you have a fixed-rate mortgage, then your mortgage payment will stay the same. This makes it easier to plan and budget for years to come. Knowing how much you need to budget for housing is important because if it is affordable in the beginning, it will continue to be even if your income doesn’t increase. If your income does increase, then less of your income will be spent on housing as your payments never change with a fixed-rate mortgage. You wouldn’t be able to say the same if you continue renting. What happens if your income doesn’t increase faster than rent?
Homeownership Builds Wealth
You have to pay for housing whether you rent or own, the big difference between the two is who you are paying. When you rent, you are paying a landlord or property manager. When you own a house, you are paying yourself. Having a mortgage might seem like it is entirely a debt, but the truth is that your mortgage can be an asset. As you pay down your principal and cover your interest payments, you can reduce the amount you owe on your mortgage. Eventually, you will get to a point where you owe less on your home loan than your home’s value. At that point, you have equity and equity is an asset.
You can tap into that equity through an equity line of credit or a cash-out refinance to work in your favor. Tapping into your equity can allow you to remodel your house, take a vacation, or buy an investment property. For many in America, the largest asset anyone owns is their house or the equity on their house. Rent does not have the equivalent of equity. All the money you pay into rent is gone forever into someone else’s wallet. Buying a house is a great way to get your housing payments to work for you and your bottom line rather than an ever-increasing part of your budget.
Homeownership Provides Freedom
Are you tired of invasive landlords? Have you had enough of absentee property managers? Do you want to be able to paint your walls without worrying about your lease? Homeownership means never having to worry about what your landlord will think again. Turning a house into a home is all about having the freedom to make your house a place where you are comfortable at all times. If that means planting a garden, adding a basketball court, or building a large patio, then you can do that when you own a house. If you are renting, then you need the owner’s permission.
Final Thoughts
Home prices are rising, which can be scary for home buyers, but especially first-time home buyers. But, it is important to remember that home prices are relative. In a vacuum, today’s home prices might seem like an obstacle. However, when you take into account today’s low mortgage rates, rising rents, and rising home prices, buying a house now is still great value. Everyone is in a different financial situation. If you are renting, it it is absolutely worth the time and energy to see if buying a house is good for your own situation. If you want to know whether buying a house is affordable for you, contact us. We can give you a complimentary mortgage qualifier to see what options are best for you. Don’t just assume that continuing to rent is in your best interest. Look at the numbers and see what truly makes sense.
