60% of Tenants Had Their Rents Increase This Past Year. Is It Time to Buy?
- Landlords have been able to raise rents as home prices have soared.
- There may come a point when owning a home costs you less money.
How many more rent hikes can people take?
During the pandemic, many landlords had no choice but to discount rents heavily as unemployment rates soared and demand for rentals dropped. But things have looked very different over the past year. Not only have sky-high home prices driven rental demand upward, but many landlords have been trying to recoup the losses they took during the pandemic. The result? Tenants across the country are paying a lot more money to put a roof over their heads.
In August, Freddie Mac reported that 60% of tenants saw an increase in rent over the past year. And of those who experienced a rent hike, that increase was over 10%.
If your rent keeps creeping upward, you may reach a point where you can spend less money on a mortgage each month and own a home instead. But is that a route worth taking?
Look at all of the numbers
You might get frustrated with your rent increases and decide that buying a home will be less expensive for you. But before you make that call, be sure to look at all of the costs of homeownership -- don't just compare a rent payment to a mortgage payment.
Perhaps you're able to sign a mortgage that leaves you paying $1,500 a month for a home the same size as your $2,500 rental. But between property taxes, homeowners insurance, maintenance, and repairs, you might more than make up that $1,000-a-month difference. So don't assume homeownership will be less expensive than renting before accounting for all of the different expenses you'll have to take on.
Where are you in life?
You may run the numbers and find that homeownership is doable financially. And it may even result in lower housing costs than renting.
But before you take the leap into homeownership, think about where you are in your life right now. Are you settled into a career? Into a relationship? Are you certain you want to commit to living in the same place for a good three to five years? That's how long it generally takes to recoup the money you'll spend to close on a mortgage and break even or come out ahead financially based on your home gaining value.
If you're already in a committed long-term relationship and have been working in the same industry for 10 years, you may decide you're ready to buy. But if you recently made a career change and are still a regular on dating apps, that's reason enough to stick to renting until your life feels more settled.
How much responsibility do you want?
Even if owning a home makes financial sense and you're in a stable place in life, you may not want the responsibility of having to mow the lawn, clear snow out of your driveway, and do the many other things homeowners have to do on a regular basis. And that's okay.
Seeing your rent go up can be frustrating. But while buying a home could make financial sense in that situation, that's definitely not always the case.
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