Many renters are fed up with paying someone else’s mortgage. Still they wonder if they can afford to buy a home at this time. As mortgage interest rates spiked at the beginning of 2023 to over 7%, homebuyers faced higher monthly payments, less inventory, and higher home prices. They want to know whether they should rent or buy a home in 2023.
CURRENT MARKET CONDITIONS
This current real estate market is facing strong home prices, mortgage rates around 6.5%, and lower than usual inventory. In our last Market Report for April 2023, we summarized just that. Northern Virginia remains a sought-after area to live and work and the numbers show that. Home prices were up 0.7% from last year and a full 6% from the previous month. Additionally mortgage interest rates doubled from a year ago which initially shocked many homeowners. The number of homes for sale are down about 35% from last year and last month, which means buyers have less choices of homes to choose from. These conditions made made people wonder if they should continue to rent in hopes of lower prices, lower mortgage interest rates and a wider selection of homes.
WHAT THE NUMBERS SAY
According to the National Association of Realtors, two-thirds of a person’s wealth comes from owning their home. Additionally, the National Association of Realtors also says that homeowners have up to 40 times more net worth than renters. These numbers show that in most instances, it is better to own rather than rent. Still, most would agree they would prefer to wonder but wonder if they can afford to own.
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Firstly, renters should be aware that they are paying a mortgage – someone else’s mortgage. Those buying investment properties make sure the monthly rent will cover their mortgage with the lender. This is done even before they purchase a home. So renters are already paying this amount, sometimes more. Secondly, national figures show that rents are increasing each year. Many renters are already facing this new reality. This differs from a monthly mortgage payment that stays the same month after month, year after year. Additionally, the longer a person pays their mortgage, the more equity they build until their home becomes a valuable asset. Once you have equity and mortgage rates fall, you are able to refinance at a lower rate and possible lower your monthly mortgage payments even more.
EVERYONE IS DIFFERENT
This is not to say renting is all bad. There are definitely some instances when renting a home makes much more sense. According to U.S. News, “renting allows you time to ensure the new location is the right fit, realize you’ve downsized too significantly or decide you would rather split time in two or more locations. It provides some breathing room before making another significant investment”.
In general, most would agree that owning your home is preferred to renting. Still, because each situation is different, getting good guidance throughout life’s adventures is critical. It’s a hard decision on whether to rent or buy a home in 2023. It’s smart to contact a trusted realtor early in the process and a great realtor will be by your side for a lifetime.