You may have seen reports in the news recently saying it’s better to rent right now than it is to own your home. But before you let that impact your decisions, you should understand what these claims are based on.
A lot of the time, these reports are assuming things that aren’t realistic for the average household. For example, the methodology behind one of those reports says that renting is the smarter financial option because of the opportunity to invest money elsewhere. It assumes renters take the money they’d spend on costs tied to buying a home and put it in an investment portfolio.
But here’s the thing – most people who rent aren’t making those investments. Ken Johnson, Co-Author of the BH&J National Price-to-Rent Index, explains:
“One of the difficulties with the rent and reinvest model is many people . . . simply rent and spend the difference. . . . That’s wealth destroying.”
The reason homeownership is one of the best investments you can make is the wealth it helps you build. That’s why there’s a significant difference between the net worth of the average homeowner and the average renter (see graph below):
So, before you renew your rental agreement, think about the opportunity to build wealth that homeownership provides.
Bottom Line
If you find yourself torn between the decision to rent or buy a home, it can be helpful to seek the guidance of a real estate advisor. A good advisor will be able to provide you with the information and insights you need to make an informed decision. They will take the time to understand your unique circumstances and goals, and can help you evaluate the pros and cons of both renting and buying.
They can provide you with information on the local real estate market, including trends in prices and inventory, and can help you assess the affordability of different options. Additionally, they can help you navigate the home buying process, from finding the right property to negotiating the best price and closing the deal. Ultimately, working with a real estate advisor can help you feel confident in your decision and ensure that you make the best choice for your financial and personal situation.