With home prices and interest rates on the rise, some home shoppers have exited the market and have recommitted to renting instead of buying for the time being. They may end up regretting that decision. According to a January 2022 report from ATTOM Data, owning a median-priced home is still more affordable than the average rent on a three-bedroom home in most markets across the country.
According to the report, the expenses involved in owning a home—purchase price, interest, closing costs, maintenance, taxes, repairs—consume a smaller percentage of average wages nationwide than renting.
It’s a compelling point, especially when you consider the other benefits of owning versus renting.
Owning a home is like having a disciplined savings strategy. Every month, your principal payment accrues to your savings account whereas a rent payment is a deposit into your landlord’s savings account. If you’re lucky, as most homeowners have been, the home itself further adds to your savings by building equity over time, increasing your net worth, credit score, and purchasing power. What’s more, by owning, you can lock in your monthly payment for 15 or 30 years, and avoid annual rent increases.
Today’s rise in interest rates is mostly about optics. The reality is that mortgage rates are still attractive, and out-of-pocket expenses are lower for most homeowners than renters.
Once you get on the homeownership train, your home’s equity keeps pace with other homes in your neighborhood; as a renter, you fall that much further behind each year. With some shoppers exiting the market due to rising interest rates, it’s a great time to recommit to your home search.