Does it make more sense to buy a house or rent an apartment in 2021? This is a classic question among potential home buyers and renters across the country. While the dream of owning a home, building equity, and enjoying stability is quite alluring, some people favor renting for its flexibility, less maintenance, and the thought that it carries lower costs. As with everything else in life, your choice of housing type is highly dependent on your specific situation.
How Long Do You Plan to Stay in the Same Location?
Do you plan to lay down roots in your community, or do you desire more flexibility? If you feel certain, you’ll stay in a home for at least five years, buying a home could make more sense from a financial perspective. But suppose you expect to relocate within a period of about five years or less? In that case, you’re better off renting owing to the fact that the costs associated with homeownership are significant and hardly worth it if you plan to sell within a few years. It’s, therefore, essential to assess your current life situation and consider if it’ll change within the next few years.
Low Mortgage Rates, Rising Home Prices
The primary advantage to buying this year is snagging a discounted home loan rate. Interest rates plummeted to historic lows last year, and if the report by the Federal Reserve is anything to go by, they’ll likely remain low for the next few years. As the Corona Virus threat eases and employment rises in 2021, buyer demand is expected to rise. With high buyer demand coupled with limited housing inventory, housing prices have been pushed up.
Consider looking around to see how high home prices are in your target neighborhood relative to what you’d expect them to be with this reality in mind. After all, home prices have only risen substantially in some cities and more modestly in others. In fact, according to a study by Realtor.com, there are housing markets in some metro areas with relatively low median home prices where buyers can make the most value. Conversely, there are cities with steep home prices and declining rental costs, moving the needle into the “renting” column instead of buying.
Estimate the Cost of Buying Vs. Renting
This is one of the most significant factors to think about. Deciding whether to rent or buy always comes down to what you can afford. Simply put, both renting and buying come with high costs, so you want to be realistic about your financial situation. Take into account a home’s purchase price, down payment, monthly mortgage costs, closing costs vs. the monthly rental payments, and subsequent assumed costs over time. This will, of course, depend on a few key factors, such as your location and the prices of other homes or rentals in your area.
Particularly at this moment when low-interest rates have generated more bidding wars and driven home prices up, you want to figure out ahead of time how much over the asking price you’re willing to pay if you’re considering buying.
Figuring out whether to buy or rent is a decision that essentially boils down to your financial circumstances and what you intend to do with that property. So, assess your own finances and goals to see whether buying or renting is right for you.