Is It Better to Rent or Buy a Home in Today’s Market
The Great Debate
In a tale as old as time, people are often told that renting is akin to “throwing money out the window.” From the time most individuals enter adulthood, one of the most circulated pieces of advice is that it is far better to purchase property and to own a home than to rent.
However, we must ask ourselves if this is outdated advice. The market has changed drastically even in recent years. If you are looking to make some life changes, you are likely assessing if it is worth it to purchase a home versus renting. After careful examination, it will be clear that both options – renting and buying – offer various advantages and disadvantages.
Pros and Cons of Renting
While renting has always carried a somewhat negative reputation, there are many advantages to this particular life choice.
Some of the benefits renters will experience include:
- Flexibility
- Limited responsibilities
- Amenities
Renting offers a great amount of flexibility. 32% of people ages 25-44 have considered a career change. Particularly if you are starting out in your career, it may be difficult to know where you want to “put down roots.” Renting offers great flexibility to be able to take different job opportunities, regardless of their location.
Along with flexibility, there is a lighter responsibility load that comes with renting. If appliances break, or there is a structural problem in your rented property, it is typically not the responsibility of the renter to fix this problem. This is a significant weight off, considering the average appliance can range anywhere from $2,400 to $5,400.
In addition, many apartments offer amenities that do not come with a home. Workout facilities, clubhouses for hosting events and indoor and outdoor pools do not come with the average home.
While all of these pros can work to your advantage at certain points in life, there are some downsides to renting that you must consider. These include:
- Lack of agency
- Rent increases
- No equity
While it is not your responsibility to fix anything in your rented property, this also leads to a lack of agency. Paint colors, appliance upgrades and flooring are all pre-installed and not up to the inhabitaqtn’s discretion.
Furthermore, while the upfront costs of renting may be less, renting also comes with less stability. In November 2023, the average cost of renting an apartment grew in each U.S. state. Rent increases are at an alltime high, and many apartment complexes lean on the fact that individuals will pay the increased rent rather than move.
Lastly, when you rent you are not building up any home equity. Equity is the amount of money that you have invested in your home. When you sell a home, you typically can use the equity from your previous home to put a down payment on a new, likely larger, property. Renting does not allow for this.
After carefully reviewing the pros and cons of renting, it is equally important to delve into the two sides of homeownership.
The Ups and Downs of Homeownership
Purchasing a home is part of the American dream. A recent study from Business Insider reported that there are about 54 million Americans who said they intend to purchase a home. While this is the dream of many, there are still advantages and disadvantages to consider with homeownership.
Those who have purchased a home will happily report the following advantages:
- Building equity
- Long term stability
- More choice and freedom
Homeownership allows you to build equity into a property overtime. This is a huge advantage, and allows individuals to thrive in the housing market, and continue to “move up” and purchase larger, more expensive properties over time. Visit this website to learn more about the uses of equity.
There is a great long term stability that comes with homeownership as well, that offers both financial and emotional benefits. Between moving trucks, materials, movers and new furniture, the cost of moving can be extremely expensive, and a huge financial setback. In addition, Medical professionals have cited moving as one of the top 5 most stressful life events. Living in a home offers stability that can benefit one’s mental health and overall wellbeing.
Additionally, when you purchase a home, you have full agency to make it completely yours. The freedom to modify and customize a property to match your personal taste and style is a definite pro of owning a home.
However, with great purchases also comes great responsibility. Some of the difficult parts of homeownership include:
- High initial cost
- Making permanent decisions
- Maintenance responsibility
The average downpayment on a house is 6% for first time home buyers and around 17% for repeat buyers. While these do not seem like high percentages, this is a significant amount when you take into account the average price of a home. For example, in Illinois where the average house cost is around $238,600, a 17% down payment is $40,562.
Buying a home is also a very permanent decision. You do not have the freedom and flexibility to move year after year due to work, relationships or family circumstances.
Finally, the phrase “you break it, you buy it” also applies to owning a home. When appliances break, there are structural issues or if your home suffers any damage, it is your responsibility as a homeowner to pay for these costs.
The Current Housing Market
While there are many aspects that go into deciding if it is right for you to purchase a home, it is also important to consider timing. The housing market ebbs and flows, and there are times when interest rates are higher due to the market. While the housing market can vary based on location, local government and economic conditions, there are a few general trends to consider in the market:
- Interest Rates: It works to your advantage to purchase a home when interest rates are low. For example, the maximum mortgage interest rate was around 5.21% between 2010-2019, but now hovers around 7.79%.
- Housing Availability: The number of homes currently on the market can also make a difference! Housing follows the rules of supply and demand, and if there are fewer homes on the market, buying becomes competitive and prices can soar.
- Government Policies: Policies, taxes and zoning regulations imposed by the government can also greatly affect the cost of housing.
Ultimately, the decision to rent or buy a home is a deeply personal decision. It is important to take into account your own personal circumstances, lifestyle preferences and plans for the next 5-10 years. However, by staying an informed consumer in the housing market, you can make the best decision that will benefit you both now and for years to come.
