Mortgage rates are low, rental prices are high and home prices have stabilized for now. The question is, should you rent a house or buy a house in the current real estate market?
Buying or Renting a House
With the current tight rental market, it is cheaper to buy a house than it is to rent a house. According to Trulia, it is currently on average 39% cheaper to buy a house compared with renting in the top 100 real estate markets.
In today’s real estate market, low mortgage rates and high rents make buying a house seem like the logical answer. In the long run, what matters most is the appreciation rate of your home. If the housing market should decline again, then it would be more expensive to own your home than renting. Normally, inflation-adjusted home prices rise about 0.5% per year, but as we saw in 2008, housing prices can fall rapidly.
Are You Prepared to Own a House?
There are numerous advantages to owning your home such as not having to worry about a landlord, tax deductions and appreciating in value.
The first question is can you afford the down payment, closing costs and other costs associated with buying a house. Then there are the yearly costs of owning a home such as property taxes, homeowners insurance, mortgage and maintenance. It isn’t like renting; if the furnace or hot water tank breaks you will have to pay.
Are you prepared to stay in your home for at least five years? If you had to move, could you sell your home quickly or could you wait out a downturn in the housing market?
The Pros and Cons of Renting
Renting a home has its pros and cons, but in today’s real estate market it is expensive to rent. The pros of renting your home include:
- You are not responsible for the upkeep of the house such as holes in the roof, plumbing problems or broken appliances.
- The only insurance you might buy is renters insurance, and that is cheap.
- Being able to move as soon as your lease is up if you should find you do not like the house or the neighborhood.
The cons of renting your home include:
- Dealing with a landlord who can be intrusive or troublesome.
- The possibility of your landlord raising the rent substantially when the lease is up.
- The possibility of your landlord selling the house when the lease is up or not renewing your lease for some reason.
If you know you are going to be living in the house for many years, then you can withstand the swings of the real estate market. If you are undecided, don’t let the current talk force you to make a hasty decision, rent your home for awhile and make the proper decision.