**Is It Better to Rent or Buy? What to Do in a Hot Housing Market**
**With surging rent and home prices, it’s worth doing the math**
**By Will Parker and Nate Rattner, The Wall Street Journal, May 13, 2022**
**While rents have risen rapidly all over the country, home-sales prices rose even more. Rent for a single-family home rose 13.1% in February, compared with the same month last year, according to housing data firm CoreLogic.**
**Home prices were up 20.9% in March, compared with a year ago. Interest rates for 30-year fixed-rate mortgages have also risen to an average of 5.3% as of the week of May 12, up from 2.96% a year ago, according to Freddie Mac. ...**
**The increased cost to buy a home means that the time it takes to break even, compared with what one would pay to rent a comparable house, has gotten longer. ...**
**Selling before the break-even time can cost a lot due to the projected costs of ownership, which include things like property taxes and maintenance, exceeding home price appreciation and the cost of renting a median-price house over the same period....But owning after the break-even time is advantageous and the advantage grows over time...** [end quote]
Whether you rent or buy, you have to live somewhere. This break-even analysis shows that people who plan to move often do better by renting. People who plan to stay put do better buying.
As part of my fiscally-conservative strategy, I bought young, using a special NYC program for first-time home buyers with a low fixed mortgage rate. (9.75%) I chose a home whose mortgage was the same as my rent since I knew I could swing it without effort. As I moved from house to house, I always exchanged in the same price range, capturing capital gains in the price of the new home but not stepping up to a higher mortgage although my income was increasing. I paid off my last mortgage, buying my boyfriend’s (now DH’s) home and paying off the mortgage to him. (He paid off his mortgage to the bank.) As a couple, we have been rent-free and mortgage-free since 1990.
The traditional advice for the fiscally-conservative is to pay no more than 25% of income for housing and pay off the home before retirement. (We retired in 2001.)
Although Zillow says that my home has appreciated to a ridiculous extent I don’t consider this part of my net worth. I think of it as “one housing unit” since I would just have to buy another house in the same market if I sold it.
The decision to rent vs. buy is probably the most important financial decision a household can make.