Is It Really Better To Rent Than To Own a Home Right Now?
Have you seen the news reports claiming that renting is better than owning your home right now? Before you make any decisions based on those headlines, take a closer look at what they're actually saying. Many of these reports are making assumptions that aren't realistic for the average household. Don't let the media sway your decision – do your own research and make the choice that's right for you and your unique situation.
A lot of the time, these reports are assuming things that aren’t realistic for the average household. For example, the methodology behind one of those reports says that renting is the smarter financial option because of the opportunity to invest money elsewhere. It assumes renters take the money they’d spend on costs tied to buying a home and put it in an investment portfolio.
But here’s the thing – most people who rent aren’t making those investments. Ken Johnson, Co-Author of the BH&J National Price-to-Rent Index, explains:
“One of the difficulties with the rent and reinvest model is many people . . . simply rent and spend the difference. . . . That’s wealth destroying.”
The reason homeownership is one of the best investments you can make is the wealth it helps you build. That’s why there’s a significant difference between the net worth of the average homeowner and the average renter (see graph below):
So, before you renew your rental agreement, think about the opportunity to build wealth that homeownership provides.
If you’re unsure whether to continue renting or to buy a home, work with me, a real estate advisor who can help you make the best decision.