Published by REALTOR.com | November 29, 2024
Rental prices have fallen for the 15th straight month—so it makes more sense to rent instead of buy, right?
Right now, it’s more affordable to rent than buy in all 50 of the major metro areas, according to the Realtor.com® October 2024 Rental Report. The median asking rent in these metros was $1,720, down $23 from last month and $40 from its August 2022 peak.
Meanwhile, with a median home listing price of $425,950, a monthly mortgage payment would set the average homebuyer back $2,229—around 30% more than the median rental price. That’s assuming a 20% down payment and a 6.93% interest rate. It doesn’t include property taxes or insurance.
So it makes sense to rent, right? It’s not that simple.
Why you might rent
Renting has benefits beyond just saving money in the short term.
It doesn’t require all the grunt work of home maintenance and upkeep, which can be pricey and time-consuming. Homeowners can expect to spend between 1% and 4% of their home price on maintenance annually.
“One of the biggest advantages of renting is the lack of responsibility when it comes to major systems and appliances within your living space,” says Scott Waters, a real estate professional with Real Broker LLC, in Maclean, VA. “When there’s an issue with a major system in a home you rent, the landlord is ultimately responsible for taking care of both the tenant and the problem.”
Renting also offers flexibility.
“If you woke up tomorrow and wanted to move to another state, as a homeowner, you’d have to list your home, wait for an offer, and go through the settlement process. As a renter, you have the flexibility to move at the end of your lease or even sublease your space,” Waters says.
On the other hand, renting doesn’t allow you to build the equity you would if you owned your home. On top of that, your living situation is at the whims of your landlord. And you’re essentially paying someone else’s mortgage while gaining no long-term value.
Why you should buy
Buying offers you a chance to build equity and long-term wealth.
While interest rates are high compared with where they were a few years ago, that shouldn’t keep you out of the market. There’s no way to know, after all, if they’ll go up or down in the future.
“Even with current mortgage rates hovering around 6.92% to 7.05%, buying a home can still be a smart choice. Yes, these rates are higher than we’ve seen in recent years, but they’re not as daunting when you consider the long-term benefits of homeownership,” says Mike Roberts, co-founder and CEO of City Creek Mortgage in Draper, UT.
There’s also stability with a fixed-rate mortgage.
“Renters are often at the mercy of landlords who can increase rent annually,” Roberts says. “With a fixed-rate mortgage, your payment stays the same for 30 years. That predictability is worth something.”
And not much beats the security of owning your own home.
However, there are some downsides: You’ll need a fairly hefty chunk of change for a down payment—the median down payment between July and September of this year was $30,300—and you’ll be responsible for any maintenance issues.
So is it worth it to buy?
