The news that U.S. inflation has risen not only makes people recoil at the sticker shock at the gas pump and in the grocery store aisles, but it also leads to some questions about what’s the best housing option right now: buying or renting. Although, to some, it’s more what is the least painful option than what is “best.”
Buying a house has deterred some budget-minded people since the pandemic sent real estate into a frenzy. While the market isn’t as red-hot as it was a year ago, it still seems like a seller’s market. However, taking a wait-and-see approach on buying may no longer be the safer choice, with worrying inflation-fueled increases in rent.
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How Does Inflation Affect Rent?
Inflation itself is not considered a bad thing by analysts. The Federal Reserve believes that its 2% target inflation rate encourages price stability and maximum employment. However, 2% is not where the U.S. is at.
Regarding the rise in “shelter” costs shown in the latest Consumer Price Index, it may be bad news, but it’s not surprising news. Anyone who has a landlord is aware of the trend. A study showed rents for a one-bedroom are jumping an average of 11.6% in 2021, with the average two-bedroom going up by 13.6% over the same period, according to Fortune.
The rent increase is … complicated. Increases are believed to be driven in part by a scarcity of supply. During the pandemic, when houses were being snapped up, properties for rent were converted into properties that could be sold (or turned into Airbnbs), particularly outside cities and in places attractive to the “laptop class.”
Another factor: Landlords who held back from increasing the rent through 2020 and much of 2021 are now trying to recover their losses. That could be why new leases are showing such sharp increases.
Of course, some people are more than satisfied with renting regardless. To make the best of things, they’re launching rental-friendly updates or renovations, many of them budget-friendly, too. While rising food and fuel costs definitely put the pressure on, these folks are working to keep their rent expense at the desirable percentage, which is no more than one-third of take-home pay.
The Advantages to Buying a House
In 2020, stories circulated of frenzied bidding wars for houses. Hours after a property went on the market, buyers were offering figures way over the asking price. To some degree, these days are over. For one, a great deal of desirable stock is gobbled up. Supply-chain issues and labor shortages have slowed down new construction.
Where does this leave first-time homebuyers? Danielle Hale, Realtor.com’…….