Is It Better To Rent Than Buy a Home Right Now?

Is It Better To Rent Than Buy a Home Right Now?

You may have seen reports in the news recently saying it’s more affordable to rent right now than it is to buy a home. And while that may be true in some markets if you just look at typical monthly payments, there’s one thing that the numbers aren’t factoring in: and that’s home equity. Here’s a look at how big of an impact equity can have and why it’s worth considering as you make your decision.

What the Headlines Are Based on

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, especially if you’re not looking for a lot of space, it can be more affordable on a monthly basis to rent:

 No Caption Received

But if you’re looking for something with 2 bedrooms, the gap between the median rent and the median mortgage payment starts to shrink to a difference that may be more doable. The median monthly mortgage payment is $2,040. The median monthly rent for 2 bedrooms is $1,889. That’s a difference of about $151 a month. But here’s what happens when you factor in equity too.

How Equity Changes the Game

If you rent, your monthly rental payments only go toward covering your housing costs and your landlord’s expenses. So other than saving a bit more per month and maybe getting your rental deposit back when you move, the money you spent on housing each month is gone – forever.

When you buy, your monthly mortgage payment pays for your shelter, but it also acts as an investment. That investment grows in the form of equity as you make your mortgage payment each month and chip away at what you owe on your home loan. Your equity gets an extra boost as home values climb – which they typically do.

To give you a clearer idea of how equity can really stack up fast, here’s some data for you. Each quarter, Fannie Mae and Pulsenomics publish the results of the Home Price Expectations Survey (HPES). It asks more than 100 economists, real estate professionals, and investment and market strategists what they think will happen with home prices. In the latest release, those experts say home prices are going to keep going up over the next five years.

Here's an example of how equity builds based on the projections from the HPES (see graph below):

No Caption Received

Imagine you purchased a home for $400,000 at the start of this year. Chances are, since you bought, you plan to stay put for a while. Based on the HPES projections, if you live there for 5 years, you could end up gaining over $83,000 in household wealth as your home grows in value.

Here’s how that stacks up compared to renting, using the overall median rent from above:

 No Caption Received

While you may save a bit on your monthly payments if you rent right now, you’ll also miss out on gaining equity.

So, what’s the big takeaway? Whether it makes more sense to rent or buy is going to vary based on your personal finances. It’s not a good idea to buy if the numbers truly don’t work for you. But, if you’re ready and able, adding equity as the final puzzle piece may be enough to help you realize buying is a better move in the long run.

Bottom Line

When it comes down to it, buying a home gives you a benefit renting just can’t provide – and that’s the chance to gain equity. If you want to take advantage of long-term home price appreciation, let’s go over your options.

Phone(801) 871-8101

Email[email protected]

Address Buy Utah Homes
859 W South Jordan Parkway, Suite 101
South Jordan, UT 84095

2794 Properties
Page 1 of 233
Open 5/18
11151 S Tydeman Way W South Jordan,  UT 84095
$316,800
Neighborhood: Daybreak
2
Beds
1F13/4
Baths
1,002
Sq.Ft.
2012
Year Built
1
Day on Site
1999655
MLS
Open 5/18
2114 W 3360 S Syracuse,  UT 84075
$485,000
Neighborhood: Still Water
3
Beds
2F11/2
Baths
1,736
Sq.Ft.
2021
Year Built
1
Day on Site
1999660
MLS
$452,999
Neighborhood: Park
4
Beds
2F13/4
Baths
1,936
Sq.Ft.
2015
Year Built
1
Day on Site
1999661
MLS
$459,000
Neighborhood: Second Burlington
4
Beds
1
Baths
1,785
Sq.Ft.
1912
Year Built
1
Day on Site
1997937
MLS
$990,000
Neighborhood: Dimple Dell
5
Beds
3F11/2
Baths
4,188
Sq.Ft.
2017
Year Built
1
Day on Site
1999663
MLS
$660,000
Neighborhood: Pura Vita
3
Beds
23/411/2
Baths
3,105
Sq.Ft.
2023
Year Built
1
Day on Site
1999664
MLS
$515,900
Neighborhood: Daybreak Vc1 Multi F
2
Beds
2F11/2
Baths
1,504
Sq.Ft.
2019
Year Built
1
Day on Site
1999665
MLS
$764,900
Neighborhood: Marmalade
3
Beds
2
Baths
2,200
Sq.Ft.
1981
Year Built
1
Day on Site
1999667
MLS
Open 5/18
11642 S Watercourse Rd South Jordan,  UT 84009
$469,000
Neighborhood: Daybreak
3
Beds
2F11/2
Baths
1,494
Sq.Ft.
2022
Year Built
1
Day on Site
1999668
MLS
Open 5/18
358 S 550 W Springville,  UT 84663
$329,900
Neighborhood: Duck Creek
3
Beds
2
Baths
1,340
Sq.Ft.
2007
Year Built
1
Day on Site
1999669
MLS
4
Beds
2F11/2
Baths
3,632
Sq.Ft.
2019
Year Built
1
Day on Site
1999670
MLS
Open 5/18
148 N Foxmoor Way Saratoga Springs,  UT 84045
$527,900
Neighborhood: Quailhill
3
Beds
2F11/2
Baths
2,864
Sq.Ft.
2021
Year Built
1
Day on Site
1999671
MLS

Post a Comment