When you are considering buying a home, it makes sense to weigh all of the benefits from every angle. After all, this is the biggest purchase most people make in a lifetime. Owning a home has obvious emotional benefits—having a space to call your own, decorate as you please, and the other freedoms of ownership. Your home is also an investment. As such, is buying a wise decision to make?
A few financial benefits to consider:
Your monthly payment costs provide a valuable comparison when you are considering buying vs. renting. Many people may surprised to discover that, even with the recent rise in home prices, homebuying is more affordable than renting in the majority of the U.S. A new report, the “2022 Rental Affordability Report” by ATTOM, a real estate database company, says that owning a median-priced home is more affordable than the average rent on a three-bedroom property in 58% of the U.S. This means that when you own, the monthly house payment takes less of your monthly wages when compared to the cost of monthly rent.
Our HomeLend USA customers in Michigan and Florida will be happy to hear that when broken down by location, this is most true in the South and the Midwest—the regions with the most affordable home ownership markets. If affordability is important to you, consider buying in a less populous area—another trend in location that can be seen from the data is that homeownership is more affordable than renting in suburban and rural areas, versus in dense metropolitan areas, where renting more often financially trumps homeownership. However, homebuying can still be affordable in metropolitan cities—as in Detroit, Michigan (Wayne County), which is the most affordable place to own among counties with a population of at least 1 million. AATOM cites that in Wayne County, 15.7 percent of average local wages needed to own.
ATTOM cites that recent record-low mortgage rates have helped to keep the cost of owning a home below that of renting.
Another financial benefit of owning vs. renting to consider is the chance to build equity. While you will not see return from monthly rent paid, when you own a home you hold it as an asset. As such, as long as prices remain stable, you can think of it as a bank account. Even better, you have a chance to build equity if the property value increases—which has been a trend for the past several years. In ATTOM’s Year End 2020 Sales Report, they revealed that home sellers nationwide in 2020 realized a home-price gain of $68,843 on the typical sale, up from $53,700 in 2019 and $48,500 two years ago. They have not yet released the year end sales report for 2021, but with soaring home prices, we anticipate the trend continued through the year. And when you sell your primary residence, you even get a tax break—there is no capital gains tax on a profit of $250,000 (or $500,000 for married couples).
Is buying right for you? We can help you understand!
HomeLend USA advisors can help you assess your personal situation to make sure buying a home makes sense for you. So many factors weigh on the decision—your location, income, short and long-term goals and plans, and more. Let us consider your circumstance with you to help you figure out whether you should rent or buy, and if you would like to buy, how much home you can afford. We can work with you to help you understand your financing options, and which is the best for your situation. We can even provide a pre-approval letter when you decide you are ready to start home shopping to make the buying process as smooth as possible. That way you can get started shopping for a home with the confidence that it is the best investment decision for you.
Are you interested in understanding more about owning versus renting? Contact us to let us know your interest, and we can set you up with an appointment with one of our team members.