If you were thinking about buying a home this year, but already pressed pause on your plans due to rising home prices and increasing mortgage rates, there’s something you should consider before you sign that lease paperwork. Mortgage rates are still at historic lows, and although prices have been increasing lately, it’s still cheaper to buy a home than rent in most parts of the country. If you’re on the fence about whether or not to buy a place, here are some facts and figures to help you make up your mind.

Not only have home prices increased significantly this year, but so has monthly rent. The latest National Rent Report from Apartmentlist.com shows rents are rising at a rate much higher than the three years leading up to the pandemic. The report states that the national median rent has increased by 17.8 percent since January of 2021. Yes, you read that right - 17.8 percent! That's a huge jump from what we saw in rent growth in the pre-pandemic years from January to November 2017-2019 averaging just 2.6 percent. And that’s not all.

One of the many benefits of homeownership is it provides a stable monthly cost you can lock in for the duration of your loan. As a prospective buyer, rising mortgage rates and prices shouldn’t be enough to keep you on the sideline. As the data shows, rents are skyrocketing. The big difference is, when you rent, that rising cost benefits your landlord’s investment strategy, but it doesn’t deliver any sort of return for you.

In contrast, when you buy a home, your monthly mortgage payment serves as a form of forced savings. Over time, as you pay down your loan and as home values rise, you’re building equity (and by extension, your own net worth). Not to mention, you’ll lock in your mortgage payment for the duration of your loan (typically 15 to 30 years) and give yourself a stable and reliable monthly payment.

A homeowner’s monthly mortgage payment pays for their shelter, but it also acts as an investment. That investment grows in the form of equity as a homeowner makes their mortgage payment each month to pay down what they owe on their home loan. Their equity gets an additional boost from home price appreciation, which is at near-record levels this year.

To put this into perspective, the latest Homeowner Equity Insights report from CoreLogic found homeowners gained significant wealth through their home equity this past year. The research shows the average homeowner gained approximately $56,700 in equity. As a renter, you don’t get the same benefit. Your rent payment only covers the cost of shelter and any included amenities. None of your monthly rent payments come back to you as an investment. That means, by renting this year, you likely paid more in rent than you did in the previous year, and you also missed out on the potential wealth gain of $51,500 you could have had by owning your own home.

According to the latest report from ATTOM Data, owning a home is more affordable than renting in the majority of the country. The 2022 Rental Affordability Report says:

“. . . Owning a median-priced home is more affordable than the average rent on a three-bedroom property in 666, or 58 percent, of the 1,154 U.S. counties analyzed for the report. That means major home ownership expenses consume a smaller portion of average local wages than renting.”

If buying takes up a smaller portion of your pay and has benefits renting can’t provide, the question really becomes: is renting really worth it? If you’re planning to make a move this year, locking in your monthly housing costs for 15-30 years can be a major benefit. You’ll avoid wondering if you’ll need to adjust your budget to account for annual increases.

If you’re weighing your options between renting and buying, it’s important to look at the full picture. Is renting or buying a home better for you and your family? The answer is… it depends. It’s important to look at all the factors involved in making this decision, like where you live, how long you plan on staying there, and how much money you have saved up. If you can afford to buy a home and think you’ll be in that location for more than five years, it may make more financial sense to buy. But if you are unsure about your future plans, renting may be a better option for you. At the end of the day, only you can decide which path is best for you.  And I’m here to help you navigate your options, should you have any questions!