Why Buy a Home in 2024?
There are several economic factors to respect when it’s time to decide this, and one of those important factors has to do with the “gap” between how expensive it is to rent versus owning a home.
That gap has always been a factor in one form or another, but in 2024, the numbers are more attention-worthy for those trying to decide which makes more sense, renting or owning.
Running The Numbers
Forbes.com notes that mortgage rates and home loan prices changed so much in the previous year that the difference between the monthly cost of a mortgage compared to a rental lease has reached a historic high mark.
According to a Forbes report from mid-December 2023, that difference hit 52%. That number might not mean much to you on its own, but when you couple that with the fact that in 2021, the number was in the negative.
The difference between renting and owning, pricewise in 2021, was NEGATIVE ONE PERCENT. We spell that out here in all caps to ensure it is not misread. -A 1% difference compared to 52% is a vast difference.
Remember, that percentage shows the difference between a proposed monthly rental expense and a mortgage payment amount.
It’s not applicable in all housing markets, but it’s a sign to some that housing affordability is not where it could be in the early new year. And the numbers above might convince some that it’s better to rent instead of own, at least for now, as we’ll discover below. But are these consumers right to rent?
The same Forbes report clarifies the numbers above. What does it mean to have such a large gap between renting and owning?
According to Forbes, in the 3rd quarter of 2023, “it cost $1,138 more per month to own a new home than to pay rent on a new lease, once taxes and private mortgage insurance, or PMI, are figured in, according to research done by commercial real estate service provider CBRE.”
That sounds like an argument in FAVOR of renting over owning. And if the numbers above were the whole story, that may be true.
But Forbes reports in the same article that rental inventory is shrinking. The fewer available rental units in a given housing market make it harder for those committed to renting to stay the course without at least thinking about owning a home instead.
If 2024 proves to be a year where landlords have more power over renters and those who lease have fewer options, homeownership may experience a renewed interest, at least where these particular consumers are concerned.
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