Wondering whether to keep renting or buy a home this year? If so, think about it. Affordability of rent remains a challenge and has been for years. Because historically rents tend to go up over time. Census data show that rents have increased fairly steadily since 1988.
And data from Realtor.com’s latest rent report shows that rents are still rising, albeit at a slower pace than during 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).”
Rents are now much higher than in pre-pandemic averages, and owning a home could be a better option, especially if the long-term trend of rising rents each year continues. In contrast, a fixed-rate mortgage allows the homeowner to lock in monthly mortgage payments for the life of the loan (usually he is 15 to 30 years).
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:
So, if you’re looking to live somewhere where you have two or more bedrooms to accommodate your household, give you more breathing room to spread out your belongings, or dedicate the extra space to practice your hobbies, it might make sense to consider homeownership.
Homeownership Allows You To Start Building Equity
In addition to shielding you from rising rents and being more affordable when you need more space, owning your home also allows you to start building your own equity, which in turn grows your net worth.
And, as home values typically rise over time and you pay off your mortgage, you build equity. That equity can set you up for success later on because you can use it to help fuel a move to an even bigger space down the line. That’s why, according to Zonda, the top reason millennial homeowners bought their homes over the past year was to build their own equity instead of someone else’s.