Buy now or rent longer? Questions to answer before buying your dream home can be a helpful tool. Deciding whether to buy now or rent longer is rarely an easy decision. Answer these questions before buying your first home to help pinpoint the best time to start exploring homeownership.
A real estate boom during the pandemic pushed home prices to an all-time high. Add higher mortgage rates to the mix, and some would-be buyers are wondering if they should wait to see if prices or rates come down.
But is renting a better alternative? Rents have also soared along with inflation – and are likely to continue climbing due to a persistent housing shortage. And while homebuyers can lock in a set mortgage payment, renters are at the mercy of these rising costs for the foreseeable future.
So, what’s the better choice for you? There’s a lot to consider when it comes to buying versus renting. Luckily, you don’t have to do it alone. Reach out to schedule a free consultation and we’ll help walk you through your options. You may also find it helpful to ask yourself the following questions:
How long do I plan to stay in the home?
You’ll get the most financial benefit from a home purchase if you own the property for at least five years. If you plan to sell in a shorter period of time, a home purchase may not be the best choice for you.
There are costs associated with buying and selling a home, and it may take time for the property’s value to rise enough to offset those expenditures. Even though housing markets can shift from one year to the next, you’ll typically find that a home’s value will ride out a market’s ups and downs and appreciate with time. The longer you own a property, the more you are likely to benefit from its appreciation.
Once you’ve found a community that you’d like to stay in for several years, then buying over renting can really pay off. You’ll not only benefit from appreciation, but you’ll also build equity as you pay down your mortgage – and you’ll have more security and stability overall.
Also important: If you plan to stay in the home for the life of the mortgage, there will come a time when you no longer have to make those payments. As a result, your housing costs will drop dramatically, while your equity (and net worth) continue to grow.
Is it a better value to buy or rent in my area?
If you know you plan to stay put for at least five years, you should consider whether buying or renting is the better bargain in your area. One helpful tool for evaluating your options is a neighborhood’s price-to-rent ratio: just
divide the median home price by the median yearly rent price. The higher the price-to-rent ratio is, the more expensive it is to buy compared to rent. Keep in mind, though, that this equation provides only a snapshot of where the market stands today. As such, it may not accurately account for the full impact of rising home values and rent increases over the long term.
According to the National Association of Realtors, a typical U.S. homeowner who purchased a single-family existing home 10 years ago would have gained roughly $225,000 in equity — all while maintaining a steady mortgage payment. In contrast, someone who chose to rent for the past 10 years would have not only missed out on those equity gains, but they would have also seen U.S. rental prices increase by around 66%. So even if renting seems like a better bargain today, buying could be the better long-term financial play.
Buy now or rent longer? Questions to answer before buying. Ready to compare your options? Then reach out to schedule a free consultation. As local market experts, we can help you interpret the numbers to determine if buying or renting is the better value in your particular neighborhood. We also invite you to connect with us on Facebook and Instagram.
