GRAND RAPIDS, Michigan — For many adults, buying a home is a rite of passage. But with the state of the housing market and uncertainty in our economy, when is it best to rent?
According to Bankrate.com, on average, a mortgage payment in the United States costs 38% more than a rent payment.
Megan Ellis and her husband decided to rent after being outbid several times on homes in the Grand Rapids market.
“It was getting to the point where you might have a water leak or you are going to have to replace the whole roof, and then you are talking $30,000/$40,000,” Megan said. “That was very hard and very discouraging.”
Renting became their reality, and so far, it’s working out.
“I come home and I’m living in a really nice house, “ Megan said. “I have a brand new kitchen, brand new floors, and if something breaks, I don’t have to pay to fix it.”
Buying has its upsides, including building equity and the promise of financial stability, but that’s not always the case.
“It's not always an investment,” Brandon Bauer, Voisard Asset Management Group Partner and Wealth Manager, said. “Sometimes it's a loss.
Bauer warns couples shouldn’t always feel pressure to buy.
“If you buy at the height of a housing market, you could lose money buying a home,” Bauer said. “There's no guarantee you're going to make money just because you own a home.”
While buying does have several benefits, renting can be just as beneficial, especially for young couples.
“It is liberating knowing that we aren’t tied down,” Megan said. “We can leave in a year if we really want to. “
And for empty nesters, renting can give the freedom to live out their retirement with fewer responsibilities.
“If you want to travel, renting is a great option because you aren’t tied to mowing the grass or shoveling,” Bauer said.
“Also, with empty nesters, sometimes they want a pool and amenities that a community might have that you don't have to pay for right at your residence.”
Brandon says if you’re not convinced you’ll stay in a home for five to seven years, it may not be worth buying. That time frame is generally how long it takes to break even from all the upfront costs, including down payment, agent fees, and closing costs.
From a financial standpoint, Brandon has one simple rule.
“What's the price of the home divided by the rent or the mortgage cost?” Bauer said.
“If you divide the house by the rent, and it's above 15, you might want to rent.”
While Megan and her husband’s dreams of home ownership are put on hold, they’re looking at their current situation with a glass-half-full mentality, especially looking at their savings.
“When the time comes, we will be ready,” Megan said.
