Renting vs Buying a Home
Home prices have been rising quickly across the nation especially just last year. In many areas, home prices are rising faster than rent and it is shrinking the affordability gap between being a homeowner and a tenant.
Recent market analysis has shown that medium-priced single-family home is less affordable in just over ¾ of the country which is the highest total in 13 years. This number is up 39% from the end of 2020.
Though home prices are rising, rent prices are also going up, especially for single-family rentals. Single-family home rentals are in high demand especially since the beginning of the pandemic. Single-family rent prices have increased somewhere around 10.9% as of October 2021 compared to a year earlier in October 2020.
Is it better to rent or buy a home in 2022? Which is the cheaper option?
The answer to these questions currently is that owning a home is the lower cost option currently, but this gap in affordability is shrinking. Owning a medium-priced single-family home has shown to be more affordable than the average rent prices across about 58% of the nation.
This is not just taking into account the average price of a mortgage on a medium-priced home versus the average cost of rent in a location. It also factors in the extra expenses of owning including property taxes and homeowners’ insurance.
The reason that owning a home is more affordable right now is largely due to historically low mortgage rates over the past few years. Mortgage rates are slowly beginning to rise and are expected to continue to do so over the course of the next year. This will cause the trend of owning a home to slowly and slightly shift toward renting being more affordable.
The current rise in wages across the country and interest rates staying in the 3% area or enough to offset any price increases and keep homeownership on the more affordable side of the real estate market as compared to renting right now.
But the specifics of whether it is better to rent or buy a home really do depend upon the exact current state of the location in which you are hoping to live and your personal financial situation.
Homeownership has been historically shown to build more wealth for a homeowner and homeowners across America most often have higher amounts of built-up wealth as compared to renters. But there are some arguments currently amongst financial experts that say a large down payment could be made more lucrative by investing in the stock market or other higher-yielding investments.
What it really boils down to is the specific factors of each homebuyer. Factors like the location and how long a buyer intends to stay in a home play big factors in whether it is a better financial decision to purchase a home right now or to continue to rent one out. If you plan to live in a location for longer than just a few years it is most definitely the better choice to take advantage of very affordable interest rates and purchase a home.
Beyond building wealth and saving some money on your monthly housing costs there are additional benefits to owning your own home as well and one of the biggest is being able to make your home into exactly the place of peace and rest that you want it to be.
For more information on purchasing a home in southern Maryland please contact us anytime.