Does renting make more sense than buying?
The temptation to rent for folks who recently retired or will soon retire is understandable. The market’s hot. So, seizing the opportunity to take advantage of all that equity increase makes sense. Renting is OK in some cases. But the longer an early retiree rents, the riskier it becomes.
Last year when the pandemic raged, some locals decided on early retirement. Others were forced or enticed into retirement with buyouts. At that time, it was possible to rent for less than the average mortgage payment, according to Realtor.com’s quarterly rent-buy analysis.
But that was before existing and new single-family home demand pushed prices into double-digit increases. Many landlords watched the trend and bumped rents – some by double-digits.
Fast forward to the current situation. Frantic searches for rentals almost equal searches for properties for sale. And there’s been a surge in new apartment complexes development even as the multifamily trend shows rents are stabilizing. And Realtor.com hasn’t updated its U.S. countywide rent-buy analysis since the first quarter.
Regardless of whether you’re a retiree, soon-to-be retiree, or an aspiring first-time homeowner, homeownership makes more sense than being a long-term renter. But there’s an if tacked onto the end of that statement. It makes sense if you plan to stay in place for at least five to seven years and keep up with basic maintenance. That’s typically how long it takes to recoup the costs of buying and selling the property. And although today’s appreciation rates are at record levels don’t bank on it be stay the norm.
As interest rates increase and inventory becomes more plentiful home prices will begin stabilizing. We haven’t had a balanced market of five to six months of inventory in the area NETAR monitors for quite a while. The last time we had a balanced supply-demand level was in Nov. 2018. Since then, things have increasingly shifted to favoring the seller side.
That begs the question. How long will it be before the market stabilizes and supply and demand are balanced? Although there are varied opinions, the truth is we’ll know it after it happens. That’s not a weasel-out-of-an-answer response – only a statement of reality.
Builders are getting new homes on the market as fast as they can. But new homes, condominiums, and townhomes are not a quick fix given how long it takes to get new homes on the market. Inflation and an improving economy are nibbling away at the extra buying power basement-level mortgage rates buyers had during the pandemic’s peak years. Nibbling away means slow, downward pressure on home prices, which will put an equal amount of downward pressure on sales unless there’s a boom in job creation and wages.
Most housing experts think 2022 will be a stabilization year that will still be a sellers’ market but with slower price growth. That means another year when there will be ups and downs for both buyers and sellers. It’s a continuation of a market climate that gives the most reward to those who have the best local market insights and a network of professionals that quickly and efficiently navigate the complexities of a transitioning market.
Partnering and working with a professional local REALTOR® is the best time and outcome-tested way to get that done.
NETAR is the voice for real estate in Northeast Tennessee. It’s the largest trade association in the Northeast Tennessee, Southwest Virginia region representing over 1,500 members and 100 affiliates involved in all aspects of the residential and commercial real estate industries.
NETAR is the voice for real estate in Northeast Tennessee. It is the largest trade association in the Northeast Tennessee, Southwest Virginia region, representing over 1,600+ members and 100+ business partners involved in all aspects of the residential and commercial real estate industries. Weekly market reports and information for both consumers and members are available on the NETAR website at https://netar.us