The Home Buying Frenzy Of Today Means It May Make Better Financial Sense To Rent For A While

September 6, 2018

Dreamstime

It has been a traditional belief that it is better financially to buy your home rather than rent.  With each monthly payment, you pay down and eventually off your mortgage and own your home free and clear. Whereas with renting your monthly payment will never come back in owning property. Especially after the housing crash, with the combination of extremely low housing prices and interest rates, it made sense to buy.  However the tide has turned according to economists.  Now that the recession is over more people feel comfortable in making big purchases, it has led to a buying frenzy, especially over the last year. With all this buying, mortgage interest rates are up as well. That means the monthly costs of buying and owning a home that you occupy are up 14% over the past year, while rents have remained fairly unchanged with just a 4% increase in the same time frame. According to July home and rent prices, buying a home was cheaper than renting in just 35% of the nation's counties. That is down sharply from 44% just one year ago. And it's not just cheaper to rent, it may also now be a better investment. Renting and reinvesting the savings from renting, on average, will outperform owning and building home equity, in terms of wealth creation, according to new research from Florida Atlantic University and Florida International University. That is the first time renting outperforms buying since 2010. However with more homes being built, the supply of homes should begin to lower the overall prices to make home ownership a much better financial investment than in the current market.

SOURCE: CNBC

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