The Interest Rate On Rent Is 100%
Andrew and Chris had been looking to purchase their first home, but this past June they made the hard decision to delay buying and push their move further into the future. They have been renting a condo for a few years now, but last winter they decided they wanted to make a more permanent commitment and buy their first house. How exciting!
Their excitement turned into frustration due to the then-crazy housing market that included the rush of buyers making offers on just-listed properties and the bidding wars driving up the prices. They were also struggling with the thought that they were not guaranteed to even see the home in person before needing to write an offer. “This is crazy,” Chris mentioned to Andrew while on a trip to their favorite Sunday brunch spot. “Maybe we should rethink this,” Andrew replied.
As time went on and they missed out on their 6th house, they began to grow weary. They were very frustrated with the situation, and then interest rates started to rise. This caused them to rethink their decision to buy. Should they continue to rent and grow their savings while they wait for the mortgage rates to drop back down? Or should they go ahead with their purchase of a home? Their lease isn’t up until December 31st so they have some time to think it over.
Fast forwarding to October, Andrew and Chris began to see larger inventories of homes to search through. The number of days that homes are on the market have begun to increase, meaning that they don’t have to rush their buying decision. And as mortgage rates have increased, home sales prices have dropped a bit. Andrew and Christ were also able to schedule time to be out looking at homes with their Realtor, as well as take their time as they review favorites. Both of them were encouraged since they restarted their home search!
The bottom line? Yes, mortgage rates have risen, but Andrew and Chris know the rates will still rise further. Waiting for rates to drop isn’t in their plans. The positive in today’s current market is reduced competition, and their Realtor is reassuring them there will be room to negotiate after inspections. Plus, at 6.75%, they are still far lower than the impact of rent on your budget. You will almost always be able to buy more space for your dollar than when you’re renting. If you have the budget to buy, that should always be your go-to option over renting.
If you’ve got questions regarding the impact of the shift on your search or the value of your home, we’ve got answers!