- Buying a home in today’s hot market isn’t necessarily a good idea — renting can be smarter.
- You may lose money on your home if you buy now at an inflated price.
- Plus, just because you can’t afford to buy now doesn’t mean you won’t be able to in the future.
It seems like we’ve been in the ultimate seller’s market for real estate over the last two years. Even with interest rates on the rise and mortgage rates at their highest point since 2009, potential homebuyers are still at a disadvantage thanks to constrained supply.
Between inflated costs and those increasing rates on home loans, buying a house is more expensive than ever. Is there anything you can do if you want to buy, but simply can’t afford it right now?
As a financial planner, here’s what I’d suggest keeping in mind if you find yourself in this situation.
1. Buying isn’t always better than renting
The first thing I’d remind you of is that, despite the oft-repeated phrase, it’s actually not always better to buy than to rent. And renting isn’t throwing money away, either!
There are plenty of situations in which renting is the optimal choice financially, beyond the pop-up costs of homeownership, and that’s regardless of whether or not you can afford to buy.
Personally, I waited a long time to buy a home because I lived in Boston. Running the actual numbers for my situation showed that renting was the optimal financial move at the time, because it freed up more cash flow each month that I could then contribute to investments to grow my assets.
Renting provides you with a fixed, stable cost that you can easily plan around each month. When you own a house, you’re always subject to unexpected expenses, repairs, or maintenance bills that can seriously bust your budget.
Buying a house is also something that requires you to have a fairly set long-term plan. The longer you stay in a home, the more likely it is that you will either break even on your costs when you go to sell or potentially make a profit.
There’s no reason to force yourself into homeownership, especially if you can’t afford it right now. As a renter, you have more flexibility to consider your options, move for your career (which could drastically improve your finances), or simply change up your living situation as you wish.
2. This isn’t a ‘spend money to make money’ situation
Making a profit at any point from the sale of a home is a big “if.” People tend to think real estate …….