Rent Prices Soared in June. Is It Time to Buy?

The cost of renting a home keeps increasing. At what point should you stop paying rent and buy a place of your own?

The upside of renting a home as opposed to owning one is being able to more accurately predict your monthly housing expenses. When you sign a lease, you're guaranteed to pay the same amount of money in monthly rent for its duration. When you buy a home, your monthly mortgage payment is guaranteed not to fluctuate (assuming you lock in a fixed-rate loan), but because you're liable for maintenance and repairs, your costs could fluctuate substantially.

Still, when you rent a home, the money you pay each month goes toward your landlord's mortgage. Or, to put it another way, rent is an expense, not an investment like a home you own has the potential to be. So when your rent gets expensive, it could prompt you to stop handing that money over to a landlord and instead see if it's possible to buy a place of your own. And these days, rent is more expensive -- so much so that it may tempt some tenants to look into becoming homeowners.

Rent prices are climbing

In June, rent prices rose a median 4.9% on a national level for one-bedroom homes, according to Zumper. Two-bedroom rents, meanwhile, saw an increase of 6.5%.

Part of that boom has to do with renters migrating back to larger cities after fleeing them earlier in the pandemic. When the coronavirus outbreak first hit, a lot of people abandoned cities, partly out of safety concerns and partly because they figured that since they could work remotely, they might as well enjoy more space for less money. But now that coronavirus-related restrictions have largely been lifted, city life holds more appeal, and so the demand to live in major metro areas has increased and rent prices have followed suit.

In fact, rent prices remained mostly level in 2020, even as home sales took off. But since February, the cost of rent has been rising steadily month over month, and that trend could continue as 2021 progresses.

This circles back to the question -- at what point is it not worth paying rent? But the answer really depends on your financial situation and comfort level.

For some people, the idea of owning a home is too stressful to be appealing -- even if their finances are such that they can swing it. If you're overwhelmed by the idea of having to maintain a home and pay property taxes -- taxes that have the potential to rise -- then renting may be a better solution for you, even if you have to pay more to do it.

On the other hand, if you have enough money saved to put down on a home and you earn enough to keep up with the many costs of ownership, then buying a place could be a smart financial decision. That way, the money you pay your mortgage company every month will help you eventually own your home outright. Plus, you'll have the option to borrow against your home once you own a large enough portion of it outright. That could, in turn, buy you more protection and stability.

Now, one thing to keep in mind is that home values are very inflated right now due to low supply and high demand. As such, there are few bargains to be found. But that could change in the coming years, so if you're tired of spending so much money on rent, now may be the time to start mapping out a plan to buy. And if you decide that you don't want to buy, you may want to start looking into more affordable rental options -- especially if prices in your area keep going nowhere but up.