The Current Housing Market – Rent or Buy?

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Most people think that location plays the biggest role when considering buying a house – and they wouldn’t be wrong. After all, location impacts the area’s amenities, as well as property value. But what about beyond location in terms of surface value benefits? There are many other factors to consider.

Your job plays a pivotal role in choosing where you want to buy, as do safety and crime rates, political views, education access, community, taxes, commuting costs (including the psychological toll and time spent away from family and friends), and more. It’s no secret that each state offers myriad home prices, and within each state, there are further variations in regional home prices.

While we often think about real estate from a speculative position, home ownership comes with costs like Realtor commissions (on both sides of the transaction), mortgage interest, insurance, private mortgage insurance (PMI, if applicable), maintenance, property taxes, and more. Even in the fastest appreciating housing markets, these can cut deeply into any profit you may think you’re making on your purchase – and your own pockets.

Understand the Current Market

Many of us believe that real estate is a guaranteed “win” having witnessed nearly a decade of rapid market growth. However, 2008 is still fresh in many of our minds, and it’s easy to make emotional decisions when it comes to real estate. When considering a home purchase, many things outside of your control can impact the market in which you’re looking: major employers come and go, weather events can leave lasting environmental changes, and zoning laws are always subject to change.

The Rising Interest Rate Environment

The U.S. Federal Reserve (Fed) recently commented that more interest rate increases may be on the horizon. Of course, no one can predict the future of these rates, but in a rising interest rate environment, adjustable rate mortgages (ARMs) may undergo significant changes that impact what you pay monthly. If you are interested in a hybrid mortgage, you may want to consider refinancing your loan before rates rise significantly. Talk to your financial advisor to learn more.

So – Rent or Buy?

A big question – especially in areas where housing is expensive no matter which way you slice it – is whether you should rent or buy. Homeownership is entirely different from renting. As with any financial forecasting there’s a lot of crystal-ball-gazing here, and you can manipulate rent vs. buy scenarios in any number of alternate ways. Time is usually a friend to the young. Homeownership pays the greatest dividends to those who enjoy their home the longest after paying off their mortgages.

However, the numbers may be more friendly in less expensive areas, but in pricey locales, they can be downright hostile. On the other hand, there are financial and emotional rewards to homeownership, too, regardless of the market. Since a home is likely the largest purchase most of us will ever make, doing extensive research is a wise use of time. The “right” choice is different for everyone.

To learn more about first-time home buying and how it fits into your overall financial plans, download our free Personal Capital First-Time Home Buyer’s Guide.

Read the Free Guide

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Amin Dabit, CFP®

Amin Dabit, CFP®

Amin Dabit is the Director of Advisor Services with Personal Capital. Along with the EVP of Advisory, Amin helps lead Personal Capital’s financial planning experience and advice. Amin brings over a dozen years of experience in private wealth management and financial planning. Amin works with the advisory team to identify and establish strategies for reaching clients' financial goals by providing comprehensive, customized financial advice designed to improve their financial lives.

One Response

  1. Spencer

    A lot of the costs of homeownership are inevitable, but don’t assume big realtor commissions are just baked into the cake, especially with the growth of flat-fee realtors in markets with higher home prices and especially for investors who are already typically high-information buyers and sellers.


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