Rent Prices Are Only Going Up…Is It Time to Buy?
Do you feel as if rents are on the rise? If so, you’re not alone…and you’re not wrong.
“Yeah. It’s a one bedroom, zero bath, and it’s $2,000 a month. But, hey, utilities are included.”
According to this Realtor.com report, median rent in June 2021 rose 8.1 percent from that time last year. If you’re thinking that’s just a correction to pre-pandemic levels, think again. Historically, rents fluctuate less than 1 percent from month to month. In May and June of 2021, rents rose 3 percent and 3.2 percent. Across many areas of the country, that puts median rents at their highest ever recorded point.
Me: I’m a little short this month. Do you accept lint and an unwrapped cough drop?
Landlord: …
Me: OK, OK. You drive a hard bargain. I’ll throw in an old receipt and spare drill bit.
It Could Actually Be Cheaper to Buy a Home
Many people understand that homeownership is an important step toward financial stability and generational wealth. (We wrote a whole article about the financial benefits of owning your own home.)
What most people don’t understand, though, is that a mortgage is not necessarily more expensive than rent. That means you can get all the benefits of accruing equity in your home and paying less every month.
This has never been more prevalent or true than it is today. Median monthly national mortgage payments sit at $1,204. Yes, that’s an increase of a whopping 20 percent from last year’s median of $1,003. It’s undeniable that home prices and mortgages are on the rise. However, that price is still significantly lower than $1,575, the current median national rent in the fifty largest US metro areas.
In terms of monthly out-of-pocket expenses, whether it’s better for you to buy or to rent depends on a number of factors: where you live, the cost of your current rent, the cost of the home you intend to purchase, repairs needed on the home, and much more.
The important thing to keep in mind here is that paying a mortgage does not automatically mean you’ll be paying more than your rent, and in some cases, locking in a mortgage (especially at these historically low interest rates) can actually be a way to save money month to month. That doesn’t even include the value of equity and potential tax benefits that you can get.
My budgeting hacks? Off-brand mascara. Magazines from the library. Oh, and buying NoVA real estate.
When It Comes to Finances, Stable Is Better!
One of the biggest benefits of buying versus renting is the stability of it. According to available census data, median rent prices have consistently risen since 1988. As a renter, this makes financial planning and personal stability difficult. If you can’t predict or rely on what you’ll be paying for your housing from year to year, that quickly leads to added stress or even the expense of unexpected relocations.
Depending on the terms of your loan, when you own your home, you lock in your monthly rate for up to thirty years. You know that number won’t go up or down, and you can plan around that known expense—year after year.
Stable. It’s good for horses and finances.
Is Now the Time to Buy?
There are always concrete benefits to owning your own home. (An incredible 93 percent of Americans believe investing in real estate is the smarter financial move than stocks. See the whole story here.) In this market, though, it might be an even smarter move.
Rent prices don’t look to stop climbing any time soon, and home values are on the rise as well. Locking in today’s low mortgage rates gives you stability and predictability in your housing costs for decades, and you can start growing your personal wealth by capitalizing on the equity you gain with increasing home value.
Interested in talking with a real estate expert? Let’s chat. We’d love to answer any questions and discuss your homeownership options. With Ray Gernhart, you’ll discover real estate as it should be!
