Dear Egghead: Since interest rates are rising and my home-buying power is shrinking, should I rent instead of buy?
ANSWER: According to conventional wisdom, it’s smarter to buy than rent. That way, you’re paying yourself instead of a landlord — that rent money goes right down the drain.
Now that rents are rising at a torrid pace, does this change the calculus? I believe it does, pushing the needle even more convincingly toward a home purchase.
Home prices have gone up 19 percent over the past year. Most economists are predicting that prices of single-family houses will fall this year, but not dramatically. Likewise, interest rates are expected to edge higher, but not dramatically.
The shortage of apartments and other rentals is growing more serious as more people get priced out of the purchase market due to interest rates and inflation. So rental prices are headed higher, there is virtually no doubt.
If you can financially support a real estate purchase and would occupy the residence for at least the next five years, I believe that buying is the most prudent course.
Just remember that several costs are sometimes ignored by prospective home buyers, including repairs and maintenance, yardwork, real estate taxes, hefty downpayments, bigger utility costs, and many more nickels and dimes.
If you want to calculate your costs down to the penny, try this rent or buy calculator.
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