Rents rose again in January. Is it time to consider buying instead?

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Tired of rent hikes? Here’s how to know if buying is a good solution.

Key points

  • The average rent for multi-family dwellings rose 13.9% year over year in January.
  • With rental growth likely to slow in 2022, it might be time to consider buying a home rather than continuing to pay a premium.

There was a time when landlords were so desperate to get leases signed that they practically gave rent for free (or at least for a few months). The rental market these days is completely different – and it most certainly favors landlords.

Since rental demand has skyrocketed, many landlords are pushing up costs — and tenants are paying because they simply have no choice. In January, the average multifamily rent rose 13.9% from a year earlier, according to the latest Yardi Matrix Multifamily report.

Now, to be clear, when we say “multifamily” we mean multi-unit properties, like apartment buildings. Rents for single-family homes may have increased at a different pace.

On the bright side, Yardi says rents aren’t likely to stay in the 13% growth range through 2022, so at some point tenants might be relieved. But for now, renters are stuck paying for their homes, to the point where it begs the question: Does buying make more sense?

Should you buy a house instead of renting it?

The benefit of buying a home is locking in a monthly mortgage payment that cannot change over time (unless you refinance or take out an adjustable rate loan). When you rent, your landlord could increase your costs when your lease expires.

But rising rents shouldn’t necessarily make you rush to buy a home. For one thing, right now house prices are inflated nationally and inventory is pretty limited. You may find it difficult to find a home that fits your budget.

Plus, mortgage rates aren’t at record highs like they were for most of 2021. If you’re stuck paying a higher price for a home today, you won’t necessarily benefit from an interest rate low enough to make it affordable.

But current housing market conditions aside, there are certain responsibilities that come into play when you’re buying a home rather than renting one. For one thing, every little maintenance or repair item becomes your financial responsibility. It could really blow your budget, not to mention take up a lot of your limited free time.

Plus, when you own a home, you have to pay peripheral costs like property taxes and home insurance. And these fees can increase over time, so even if you lock in a fixed rate mortgage, you’re not necessarily guaranteed to have predictable housing costs.

What’s the right call?

If you’re tired of paying a small fortune for rent, you might be inspired to buy a house instead. And if you can afford it based on current prices, it might end up being a smart financial move.

But before you make that call, ask yourself if you want to own a house. If you’re not particularly keen on taking that leap, or aren’t sure you’re financially ready, you can focus on lowering your rental costs instead.

In this regard, you have options. You can negotiate with your landlord, find a roommate to split your rent with, or, if your lease is ending soon, start looking for homes with fewer amenities and a lower monthly price. You may not be able to prevent the fact that rental prices increase in general, but you can take steps to minimize this burden if now is not the right time to buy a home.

A Historic Opportunity to Save Potentially Thousands of Dollars on Your Mortgage

Chances are interest rates won’t stay at multi-decade lows much longer. That’s why it’s crucial to act today, whether you want to refinance and lower your mortgage payments or are ready to pull the trigger on buying a new home.

Ascent’s in-house mortgage expert recommends this company find a low rate – and in fact, he’s used them himself to refi (twice!). Click here to learn more and see your rate. While this does not influence our product opinions, we do receive compensation from partners whose offers appear here. We are by your side, always. See The Ascent’s full announcer disclosure here.

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