Should you rent or buy? High home prices, mortgage rates challenge the American dream of homeownership
When Greg Morano proposed to his girlfriend Kayla Lewis, he knew their next big decision as a couple was looming: should they rent or buy their first home together? The couple spent months discussing the size, style and location of apartments before considering homeownership.
"I think that's the dream everybody grows up with — it's one day hoping you have something you can call your own, and finding your person, which, I found mine," said Morano.
But the American dream of homeownership is being challenged by high home prices and mortgage rates, leading some to consider renting as a wiser option. According to a recent survey by the National Multifamily Housing Council, a public policy group, the monthly cost of owning a home is now an average of $1,000 more than renting.
Buying a home has traditionally been seen as the smarter financial move. But with interest rates still high, the median mortgage payment has reached a record high of over $2,000 per month since 2009, according to the Mortgage Bankers Association.
In major cities like Boston, where the cost of homeownership has risen by more than 30% in the past year, it may be cheaper to rent instead of buy. Other cities where renting is less expensive than owning include Seattle, San Francisco and Austin, according to real estate website Realtor.com.
Chloe Moore, a financial planner and former Atlanta homeowner, made a lifestyle and financial decision to sell her home and rent instead.
"One of the things I like to say is that rent is the most that you'll pay and the mortgage is the least that you'll pay," said Moore.
According to Moore, purchasing a home is only advisable if you plan to stay for at least seven to 10 years, have enough savings for the down payment, closing costs and maintenance expenses, and can afford to pay property taxes.
"Make sure that you have your finances in order, understand your numbers and work with people that you trust," Moore said.
Housing experts also suggest setting a budget and sticking to it, even during a bidding war. Additionally, experts advise using the 28-36 rule, which means spending no more than 28% of your gross monthly income on housing and no more than 36% on all debts.
As for Morano, he said homeownership was a little more affordable than some of the apartments available for rent. He and Lewis recently closed on a home in northern New Jersey.