The Advantages of Purchasing Instead of Renting
Considering the idea of purchasing a home? Although current mortgage rates may appear daunting, here are two compelling reasons why, if you're prepared and capable, it might still be a wise decision to invest in your own property.
1. Typically, Property Values Increase Over Time
There has been some uncertainty over the past year regarding the direction of home prices. However, it's important to clarify that nationally, they continue to rise. In fact, over the long haul, home prices tend to consistently increase (refer to the graph below for more details).
By analyzing data from the Federal Reserve (the Fed), one can observe a consistent trend: home prices have steadily increased over the past 60 years. While there was a notable exception during the 2008 housing crash when prices deviated from the usual pattern, overall, home values continued to rise.
This serves as a significant rationale for why owning a home may outperform renting. As home prices rise and you make mortgage payments, you accrue equity. This expanding equity has the potential to substantially enhance your overall net worth. According to the Urban Institute:
"Owning a home is essential for accumulating wealth and maintaining financial stability."
2. Long-Term Trend: Rent Continues to Increase
Here's another factor to consider when contemplating home ownership versus renting: rental costs consistently rise over the years. While renting might seem more affordable in certain locations currently, each lease renewal or new agreement often brings with it an increase in rent prices. According to data from iProperty Management, rent has shown a consistent upward trend over the past 60 years as well (refer to the graph below for details).
How can you break free from the cycle of escalating rents? Purchasing a home with a fixed-rate mortgage enables you to stabilize your housing expenses and bid farewell to those frustrating rent hikes. Such stability holds significant value.
Your housing payments represent an investment, presenting you with a choice. Would you prefer to invest in yourself or continue paying your landlord?
By owning your home, you're investing in your future. Even if renting seems more economical, the money you spend each month is essentially lost.
According to Dr. Jessica Lautz, Deputy Chief Economist and VP of Research at the National Association of Realtors (NAR):
"If a potential homebuyer possesses financial stability, can effectively manage monthly mortgage payments, and is capable of handling associated household maintenance costs, then it is advisable to consider purchasing a home."
Bottom Line
If you're weary of rent hikes and interested in discovering the numerous advantages of owning a home, reach out to a nearby real estate agent to discuss the possibilities available to you.