The Financial Advantage: Why Purchasing a Home Makes More Sense Than Renting Today
Rental affordability has been a challenge for many people, and rents have generally trended upward over time. Data from the Census Bureau indicates that rents have been steadily increasing since 1988. This long-term trend can make it difficult for renters to keep up with rising housing costs and may lead some individuals to consider homeownership as an alternative.
One of the advantages of homeownership is building equity over time. While mortgage payments may stay relatively stable or increase modestly over the years, renters may face the ongoing challenge of rising rents, which can outpace income growth. By purchasing a home, you have the potential to build equity and gain long-term financial stability.
However, it's important to consider other factors when deciding whether to continue renting or buy a home. These factors include your financial situation, long-term plans, local housing market conditions, and personal preferences. Owning a home also comes with additional responsibilities, such as maintenance and property taxes.
It may be beneficial to consult with a trusted real estate professional or financial advisor who can provide personalized advice based on your specific circumstances and help you make an informed decision about renting or buying a home.
And, data from the latest rental report from Realtor.com shows rents continue to grow today, even though it’s at a slower pace than we saw at the height of the pandemic:
“In March 2023, the U.S. rental market experienced single-digit growth for the eighth month in a row . . . The median asking rent was $1,732, up by $15 from last month and down by $32 from the peak but is still $354 (25.7%) higher than the same time in 2019 (pre-pandemic).”
Owning a home can provide stability in terms of monthly payments, especially if you have a fixed-rate mortgage. Unlike rents, which can increase each year, a fixed-rate mortgage allows you to lock in a consistent monthly payment for the duration of the loan, which is typically 15 to 30 years. This can provide peace of mind and help you budget effectively over the long term.
Owning a Home Could Be More Affordable if You Need More Space
The graph below uses national data on the median rental payment from Realtor.com and median mortgage payment from the National Association of Realtors (NAR) to compare the two options. As the graph shows, depending on how much space you need, it’s typically more affordable to own than to rent if you need two or more bedrooms:
One of the advantages of homeownership is the ability to have more space and flexibility compared to renting. If you're looking for a living arrangement that provides two or more bedrooms to accommodate your household, homeownership can be a viable option.
Homeownership Allows You To Start Building Equity
As you make mortgage payments, a portion of each payment goes towards reducing the principal amount you owe, thus building equity in your home.
Additionally, as home values tend to appreciate over the long term, the value of your home may increase, further boosting your equity. Building equity provides you with a valuable asset that you can leverage in the future. For example, if you decide to upgrade to a larger or more desirable home, you can use the equity from your current home as a down payment, potentially affording you better financing terms and more options.
By owning your home and building equity, you are investing in your future and creating a valuable asset that can provide financial stability and flexibility down the line.
If you’re trying to decide whether to buy a home or continue renting, let’s connect to explore your options. With rents rising, it may make more sense to pursue your dream of homeownership.