With rising interest rates, inflation, and high home prices, the dilemma of whether to rent or buy can haunt potential buyers more than ever. You can read about both sides of the issue in many places, including some recent posts on this site. The bottom line is, it can be argued either way and is a personal decision based on your individual circumstances.
The Star Tribune recently had a section about deciding whether to buy or rent. According to their article, The Twin Cities housing market is weird right now. Should you buy or rent?,
“from a purely financial perspective, it’s definitely less expensive to rent in the metro area because rental prices in the Twin Cities are much lower than similar-sized markets and are significantly less expensive than a typical house payment.”
But there are many factors involved in making a decision to buy a home…
- You are living and buying in our market, so comparison to other markets is not really of consequence in your personal decision to buy or rent
- Home price growth is expected to slow down, but still continue to increase rather than decline so you may not end up saving anything if you wait
- There are more choices than last year but there is still a shortage of homes for sale and homes are still typically selling in less than 30 days
- More buyers are deciding to wait, resulting in less competition and fewer bidding wars
- Mortgage rates are double what they were last year, but they are still below historical averages and experts are predicting they will stabilize
- Rents may be favorable now, but that could change
- The longer you plan to stay in a home, the more sense it makes to buy
- Make sure you have enough savings to not only buy, but also have a cushion in your budget for maintenance and improvements
Back in 2014 I did a blog post about the New York Times rent vs buy calculator. At that time Jack Guttentag, Professor of Finance Emeritus at the Wharton School of the University of Pennsylvania, said it was the best he has seen. The StarTribune referred to the same rent vs buy calculator as one of their favorites just a few days ago.
The calculator helps you make your decision based on factors such as…
- Price
- How long you plan to stay
HOMEOWNERSHIP
- Down payment
- Closing costs
- Selling costs
- Maintenance costs
- Utilities
- Homeowners insurance
- Association (CIC) fees and deductions
RENTING
- Security deposit
- Broker’s fee
- Renter’s insurance
Sharlene Hensrud, RE/MAX Results – shensrud@homesmsp.com