Is It Cheaper to Rent or Buy a Home?
The question of whether to rent or buy a home may cross your mind if you are looking for a new place to stay. There is no one-size-fits-all answer to this question. There are a number of factors that you need to take into consideration in order to make the right decision, including housing market conditions, location, and financing. Here is some information that can help you determine whether it is cheaper to rent or buy a home.
Housing Market Conditions
According to a CNBC news article, home prices are rising at a rapid rate, faster than incomes and new employment, and a diminishing supply of affordable homes has caused home sales to fall. Compared to a year ago, the supply of home listings in April dropped nine percent and the sales of homes worth less than $100,000 fell 17 percent. If you wish to purchase an affordable home, you can expect to have a difficult time finding one. Nonetheless, if you are fortunate enough to find a cheap home, buying can be a more cost-effective option than renting according to Crediful.
It is generally cheaper to buy than rent in places where the majority of homes are more affordable. For instance, in Baton Rouge, Louisiana, purchasing a home is over 50 percent cheaper than renting if you take out a 30-year fixed mortgage with a 20-percent down payment. However, in San Jose, California, buying is only 3.5 percent cheaper. Also, you have to know that rents in many places across the country are easing, because of an increased availability of apartment units and rising home prices. In these places, the decision to buy or rent a home can be a very close call. Renting is usually the preferred option in a close call situation because of its lower risk and greater flexibility.
The Federal Reserve has raised short-term interest rates, but mortgage rates have continued to stay low. However, mortgage applications dropped six percent in June due to a shortage of homes for sale and soaring prices. While it is easier to get a good mortgage deal, buying a home now may not make the best financial sense, unless you can find an affordable one.
By looking into the above-mentioned factors, you will be able to make a better-informed decision on whether to rent or buy a home. These factors can change with time, so make sure you check the current market conditions and mortgage rates before you decide.