In general, financial experts posit that buying beats renting in the Twin Cities, but rising home values could soon price buyers out of certain markets. The metro has seen month-to-month home prices rise for over two years. If you want to buy in the next few years, now is a good time to let your Uptown lease lapse in favor of a starter home in Hopkins, Burnsville or another area close by.
First, if you’re renting, you are helping the homeowner gain equity – or value – in their home. A home, when it appreciates as expected, can act as a bank account later in life when the owner sells for more than they originally paid. If you spend your days renting while home prices are rising, the only person who benefits is your landlord. Meanwhile, if you owned the home, you could pay the mortgage off in time for retirement and reap the financial benefits yourself.
On the other hand, homeownership can have a lot of unexpected costs. So while the cost of rent may increase annually, almost anything can go wrong when you own a home. As a renter, you’re off the hook for everything from appliance failures to plumbing issues to general upkeep plumbing issues to general upkeep such as yard maintenance. As a homeowner, you have to budget for unexpected house failures and annual fees like property taxes.
3. Market uncertainty
The housing crash represents the greatest risk that homeowners take on. Home prices were skyrocketing and buyers were approved for mortgages well beyond their means. When buying a home, it’s critical to understand what you can afford long-term. Today there are better safeguards in place to ensure buyers aren’t in over their heads and historically low rates and comparatively low home prices mean that buying now may be a smarter choice than it was in 2006. However, there are no guarantees when it comes to home price appreciation.
Point: Draw. Homeownership, if you have a smartly planned budget and can afford it. Renting if you want to avoid all risk of potential price depreciation.
It may seem minor, but owning a home means you never have to track the number of holes you put in your living room wall and you can bring home that darling rescue dog without asking for permission. (Although some homeowner’s associations may have rules around this). The “American Dream” has long been homeownership and it’s still alive and well.
When all is said and done...
We believe that when rental costs are nearly the same or higher than buying costs - as they are in many local communities - homeownership is a no-brainer. Still, you can determine what’s best for you by entering your financials into this interactive Rent vs. Buy calculator in the New York Times to see what you can afford.
If you’re ready to see what your rent money would look like when translated to the buying market, search homes for sale here. (Every listing shows an estimated monthly mortgage payment, so you can easily compare within your price range.)