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Buy a home today or continue renting?

Though John Denver’s “Take Me Home, Country Roads” probably isn’t a tune our millennial buyers would recognize, pairing it with the barreling momentum of rents may prompt some well-timed home buying consideration.  Is it better to buy a home today or continue renting?

For many years, the logic of renting has been solid.  Pay a fraction of what it would cost to own, stay for a relatively short period of time and save for your first home.  But now, this logic seems “older than the trees.”  And, how should we answer our millennials asking if they should buy a home today or continue renting?

Zillow recently shared some interesting data suggesting that buying a home today is actually less expensive that it was 15 years ago.  But, how can that be?  Surely buying a home post-meltdown is obviously less expensive but why is it a better time to buy today?  The answer, I am certain, is simply matched up against the cost of renting.

When will our millennials sing “Take Me Home, Country Roads?”  Keep your hats on, folks.  Millennials aren’t likely to buy just because rents are on the rise.  Their philosophical beliefs and feelings of the financial services sector may be a bit tarnished.  As a result, transparency is key and solving for x, the more affordable option, will vary from person to person.

Is it

Is it better to buy a home today or continue renting?  Well, is it?  If so, “take me home, country roads!”

Working Backwards

Is it better to buy a home today or continue renting?  Let’s work backwards.  The 4 Major Factors to determine whether or not it’s better to buy a home today or continue renting:

  1. Rents – Millennials have long felt the pressure of rising rents.  And now, experts are warning that this trend is expected to hold for at least another two years.  If rising rents are your only hold back, expect the savings period to take longer.  Spending more on rent will likely result in less available income to save for a down payment.  And, because renting carries no tax benefit, literally all of this income is spent and gone forever.  Low-down payment options designed to help relieve buyers of the elongated savings period are now available.  It may be worth a look.
  2. Home Values – Although the market is still showing modest gains, rising home values are not moving anywhere near the pace by which rents are.  As a result, it’s pretty safe to assume this data will not parallel.  If considering this factor alone, home values are most closely tied to supply.  This isn’t a function of the equation that can be closely controlled.  i.e. If all other considerations are met satisfactorily by your standards, it’s absolutely time for you to buy.
  3. Income – For many, income has and continues to hold flat. Very simply put, income is staying the same while the cost to rent is increasing.  As a result, renters can now expect to save less and for a longer period of time.  However, the difference between renting and owning with flat income are fixed payments and equity.  Rent is subject to change outside of a lease agreement and is not attached to any building ownership.  With respect to one’s long-term goals, it’s almost inadvisable to continue renting.  Take advantage of the tax benefits, at least!
  4. Mortgage Interest Rates – Yes, mortgage interest rates have inched up over the past few weeks. And, while I am certain many are tired of hearing this, it’s important to remember that rates are still being offered at historic lows.  In fact, interest rates this low increase affordability.  Though it’s unlikely to be a buyer’s sole consideration, take a look at PrimeLending’s Free Float Down Option.  This allows you to protect today’s low-interest rate while reserving the option to float down to a lower rate if and when the market moves in your favor.  At the very least, a lender willing to sweeten the deal so that you’re getting the best available interest rate, is one to consider.

Solving for X, the More Affordable Option

Determining the point at which these lines intersect, when rents rise enough to disrupt your savings plan and, when interest rates rise enough to shrink affordability, will vary from person to person.  Interestingly enough, time is actually a constant factor for everyone in this scenario.  Given the known market factors, where the market sits today, can be a powerful tool when accessing your financial goals.  Why?  Because at this time we can analyze and compare and measure all factors as they presently exist.

That said, if increasing rents, flat income, modestly rising home values and low interest rates are pressuring you to consider the home buying option, contact me.  I can provide a comprehensive and personalized comparison of your specific rent vs. own scenario and help assist you with your plans for the future.  Let’s get you home, “to the place where you belong.”  And if now just isn’t the time, at least you’ll know for sure if it’s better to buy a home today or continue renting…


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