Two Reasons Not To Get Stuck in the Rental Vortex
If you currently rent your home, you may be wondering where you stand in the world of real estate. You may have heard that you would be wise to continue renting for the foreseeable future due to an increase in interest rates. As you ponder whether to continue leasing or to consider homeownership, I would argue that there has never been a better time to buy.
- UNCERTAINTY AND COST: While you may pay a fair market rent today, there is no guarantee that your rent will stay constant or that you will even have a home when your lease term ends. As many Landlords realize double digit increases in the value of their properties, they are selling their properties at top dollar. If a property is sold, there is so much uncertainty for tenants: Will the new owner renew your lease? Will they substantially increase your rent? Will I be able to keep my pets? The reality is that new owners are often forced to raise rents in order to make the numbers on their investment work. According to Realtor.com,
“Three out of four renters (74.2%) who have moved in the past 12 months reported seeing their rent increase. The strain from recent rent hikes isn’t exclusive to renters who have recently moved. Nearly two-thirds of renters (63.2%) who have lived in their current rental between 12 and 24 months, and likely renewed their lease, have also reported increases in their rent.”
The only two certainties in rentals these days are scarcity of available rentals AND that rents are on the rise.
The data that Realtor.com puts out in its Housing Forecast 2023 suggests that rates of increase for rent will be up an additional 6.3%.
Renters are finding it harder and harder to make ends meet with the burden of sharp rental increases. This uncertainty becomes a serious quality of life issue. Why live with this type of uncertainty?
Homeownership takes away the uncertainty. When you purchase a home, you have a clear understanding of your monthly payments, articulated as your PITI (principal, interest, taxes and insurance). While you may see moderate fluctuations in your taxes and insurance over the years, there is little uncertainty of what your monthly housing costs will be, as they are laid out for the term of your mortgage.
- WEALTH ACCUMULATION: You may have heard the rhetorical question, “Why pay someone else’s mortgage when you can pay your own?” Can you think of a good reason to pay someone else’s mortgage? I cannot. If there were a huge savings between the cost of renting and the cost of owning, I could be compelled to agree with that statement. But with rental costs at an all-time high, rents are often equal to what you would be paying for a mortgage on the same property. The argument that you may have heard in the headlines that “Now is the Time to Rent not Buy!” supposes that rental rates are less than a mortgage and that the tenant is thereby able to save money to put toward a future purchase. Unfortunately, that is no longer case, and tenants are not able to save in the ways they used to. According to the Federal Reserve, the net worth of a homeowner is over 40 times higher than the average renter.
If you currently rent your home, I would strongly recommend reaching out to an experienced Buyer Specialist like the agents at Homes By Connect to find out more about getting out of the Rental Vortex and into homeownership. Working with a strong team including a top Realtor® and top Mortgage Specialist, you may find that you can afford to purchase a new home and be done with the uncertainty and income-sapping of the Rental Vortex!
Katy Donovan is Owner and Principal Broker of Homes By Connect in Portsmouth, Rhode Island