Tough question, isn’t it? Some folks fall squarely on either side for very legitimate and often personal reasons. Where you find yourself in life also might affect whether you choose to rent or buy. Then there’s that wild card called the economy, which affects us all. But, absent current variables, here are more questions to ask about renting versus buying.
Is it cheaper to rent?
The quick answer is it depends where you are. A small town in Montana? Maybe. In Florida, where the population continues to grow and perennial industries such as tourism fuel the economy, not so much. Some areas can be more affordable, of course, but demand drives rental rates. And people want to live and work in Florida.
A 2016 study by GOBankingRates.com ranked three cities — Orlando, Tampa and Jacksonville — among the nation’s top 15 as great places to invest in real estate. The four criteria cited were employment growth, population growth, increase in home values and the number of years required to pay off an investment property using tenants’ rent as the payment source.
In deciding whether it’s cheaper to rent, ask yourself another question: do you want to help pay off someone else’s property, or build equity by paying off your own property?
Is it more flexible to rent?
It depends on your definition of “flexible.” If you truly need to be, say for career changes or a family situation, that’s a unique decision only you can make. The bigger question is stability versus uncertainty.
When the number of renters grows in any housing market, it shrinks the housing supply and drives up costs. The rent on a house or townhouse you might normally afford, becomes unaffordable. And that’s without considering the possibility of future payment increases.
If you own your home, your monthly mortgage payment doesn’t change. Plus, you may be able to refinance your loan to lower your payment.
Is it safer to rent?
Another question only you can answer, depending on life circumstances. But, think hard about the following facts.
According to U.S. Census Bureau data, 20 million rental households spent more than 30 percent of their income on housing in 2011 — the highest numbers in seven years, at that time. Median rent payments also increased 19.6 percent during that span — from $728 to $871.
Those 20 million households that spent more than 30 percent of their income on rent in 2011 were considered “burdened.” Per Census data, more than half of those 20 million households were considered “severely burdened” because more than half their income went to housing payments.
Also during that period, per 2011 Census data, the number of U.S. renters increased nationwide. Overall housing vacancies remained flat, but the national rental vacancy rate fell to 7.4 percent, the lowest point in five years, at the time.
As the economy continues recovering from the mid-2000s recession, job markets — particularly in major metro areas — can experience rising demand for rentals, rising rents and shortages of places to rent thanks to influxes of workers.
Don’t become a “burdened” renter (more than 30 percent of your income to rent) or a “severely burdened” renter (at least half of your income to rent). Only rent affordably or consider buying — because your payments remain static, with no unpredictable fluctuations.
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