Owning a home might be part of the classic American Dream. But it's not the easiest option at the moment. Interest rates are up, which makes loan approvals harder to come by. Plus, according to Realtor.com, home listings have dropped by nearly 16 % in 2023 — which means just finding a home to purchase can be tough.
Even if buying a home becomes easier, it’s not always the best option for everyone. Rental costs across the country are up an average 22% from 2022, but renting may still be the best move for you.
Renting frees you from having to worry too much about maintenance, too. When the ceiling leaks in your rental, you get to call someone else to come deal. And foot the bill. (But renter’s insurance is a good idea to protect the things you do own.) When maintenance issues come up in a house you own, you need to tap into your own savings account.
But what about my net worth?
Homeownership isn’t always a good investment — remember the 2008 housing crash? It’s not the most liquid investment, either. If you want to cash in on your investment, you have to jump through all the hoops of selling your home (and find a new place to live).
Renting can make your money more flexible. Example: If your rent is less than what you'd be paying in monthly homeownership costs, consider investing the difference. So if a mortgage would cost $1,500 per month, but you rent for $1,000 per month, stick that extra $500 in a high-yield savings account or another liquid investment account to grow your net worth while renting.
So should I stick to renting vs owning a home?
Owning does have its pros. On top of being a potential generational wealth builder, homeownership also means tax breaks. And nobody telling you whether you can have a pet or paint your room purple — or suddenly raising your rent.
But as tempting as it might be to join the home-buying crowd and try catching mortgage rates before they rise even higher, you don't want to rush into homeownership. Buying a home is no easy feat and maintaining it is a huge commitment for you and your budget. Doing it before you can truly afford it might be worse for your long-term financial wellbeing.
So whether you want to keep renting until your money and heart are ready to buy, or you simply need (or prefer) to rent, know you’re not throwing money away.
If you're chasing the classic American Dream, buying a home (with or without the white picket fence) might be high on your goals list. But renting isn't the nightmare money-waster you may have heard that it is. It can offer flexibility and freedom — and a roof over your head — that might make more sense for you and your budget.
Updated on April 11, 2023 to include the latest information.
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