Should I Rent or Should I Buy? The Case for Buying a Home in 2024

In the dynamic landscape of the United States real estate market, the age-old question of whether to rent or buy a home has taken a new twist over the last year. Historically, homeownership has been seen as a cornerstone of financial stability and wealth-building. However, the American dream of homeownership is being challenged by high home prices and mortgage rates, leading some to consider renting as a wiser option.

Timing the market perfectly is nearly impossible, and while a crystal ball would be a handy tool, relying on forecasts and existing data might be the next best thing. Now, the question arises: is 2024 a good time to buy a house?

The Appeal of Renting

The Urban Institute projects that between 2020 and 2040, the number of renters will increase twice as fast as the number of homeowners. A survey by RealPage found that two-thirds of apartment renters prefer renting due to lower costs and greater flexibility in relocation. New survey data from Apartment List shows that in 2022, 24.7% of millennials said they plan to “always rent” rather than buy a house.

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The Current Landscape

The decision to rent versus buy is influenced by several factors, with the rising cost of homeownership being a key consideration. Matthew Vance, Americas head of multifamily research at CBRE, notes the current “sticky situation,” where some potential buyers are holding off, anticipating a drop in home prices. However, experts like Vance are skeptical of a significant decrease, given the limited housing supply.

A significant development in August 2022 was the relaxation of mortgage affordability rules. Lenders were able to remove one of the affordability tests when assessing individuals for mortgages. This change aims to make it easier for homebuyers to secure loans, potentially enabling first-time buyers to enter the market and allowing some borrowers to take out larger loans.

Over the past six months, both house prices and mortgage rates have experienced a decline. The average two-year fixed-rate mortgage rate is now below 6%, a significant drop from the peak of 6.86% in July 2023. The trend suggests that lower house prices and mortgage rates could align favorably for prospective buyers toward the end of 2024 and even into early 2025.

The decision to rent or buy in 2024 is a nuanced one, influenced by financial considerations, lifestyle preferences, and the ever-changing dynamics of the real estate market. While renting may offer short-term benefits, homeownership still presents a long-term upside. As home prices remain high, homeowners continue to build equity.

The decision to become a homeowner is consistently advantageous when armed with both an excellent credit score and a substantial down payment. If these criteria are met, the path to homeownership remains a prudent and rewarding choice.

Source: Times Money Mentor, Apartment List.

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