The housing market has been wild lately, and rentals are no different. Rents have increased faster than income in almost every major city in the past five years. As of 2024, New York rental prices have increased seven times faster than wages, which is bananas.
Even with high rental prices, many people aren’t sure if they should dip into home buying. Conversely, some people with homes wonder if they’d be better off renting. If you’re asking yourself, “Should I buy a house or rent for Pete’s sake?” here are four ways to know you should buy and four ways to know you should rent. See which group sounds more like you and go from there.
Four ways to know you should buy:
1. Your rent costs the same or almost as much as a mortgage would in the same area.
If you’re renting a two-bed and one-bath apartment, use Zillow or Redfin to look at the cost of the same bed and bath home in the area or a nearby area you’d live in. Then, take that average amount and pop it into a mortgage payment calculator. Google the average home interest rate that day and add it to the calculator. Hopefully, this calculator can also incorporate your state, since taxes vary greatly from one to another. Finally, check out what your mortgage rate would be.
If your current rent is the same or almost the same cost as your mortgage would be, it may be time to buy.
2. You have enough money saved for homeownership.
Homeownership comes with a down payment, closing costs, inspection fees, and quite a bit of maintenance – especially at the beginning. You’ll want a comfy 10k saved in general, plus another 10k-20k depending on how much you plan to put down as a down payment.
If you’re having trouble reaching your savings goal, you may like another video we made called, “The 6 Main Factors that Determine How Much Money You Have.”
3. You plan to stay in the area long-term. Buying a house is a commitment.
Even if you plan to rent it out or sell it in the future, everything is a process and the economy could change your plans in an instant. Only buy if you can commit to being in the area for at least 3 years, the more the better.
4. You have a stable income and a good credit score.
The last thing you want to do is end up with a mortgage payment, no job, and no savings. Buying a house shouldn’t drain you of all you have, so do the math and make sure you can afford it. If your job is set and you’re doing well financially – plus have a solid credit score in the 740s or above – then you’re on the right path!
Ok, now here are four ways to know you should rent:
1. You’ve got a great deal on your rental.
Maybe you’re in a rent-controlled apartment or just have a steal going on because you’ve been there for a while. If you know you’re paying way less than the value you’re getting, it’s worth sticking around for a while and using that time to save more money.
2. Interest rates and the economy are not looking so good.
People are complaining about interest rates now, but you have to take everything into context.
They were too low, historically, for a few years, and by 2024 we were seeing more of a normal curve. Back in the 80’s, interest rates were well over 10%! Do your research and see what the rates and economy are looking like. If things seem too unstable or rickety, it may be worth waiting. Just know nothing is ever set in stone.
3. You would hate having to deal with home maintenance.
Owning a home is not easy-peasy lemon squeezy, don’t do anything and sit on your sofa breezy. Even if you buy a new build, there’s a famous saying that old homeowners like to tell new homeowners, and it’s “There’s always something. You’re never done with a house.” Let me tell you, that is some truth right there.
First, you’ll have the necessary fixes for broken things and housing issues. Then you’ll have cosmetic things to make it your style and homey. Finally, you’ll have the home renovation projects, which always somehow appear no matter how hard you don’t look for them.
If dealing with a clogged toilet or overgrown trees scraping your roof shingles sounds like an overwhelming nightmare, you’re much better off with a rental HOA taking care of all your maintenance issues.
4. You value mobility and lifestyle flexibility.
If you love to hop on a plane every other month, move cities on a whim or annually, and hate being tied down, home ownership sounds like the opposite of your vibe. Keeping rentals will allow you the freedom to come and go as you please – within the lease of course – to keep enjoying your free-spirited lifestyle.
Check out: What living paycheck-to-paycheck really means
So, are you a renter or a buyer? Let me know in the comments! And, don’t forget that our lives come in chapters, so you can be one today and another next year. It’s all about assessing your values and needs today.