Mortgage rates are rising so many are wondering if they should buy or rent. The higher mortgage rates coupled with higher home prices are making having a mortgage monthly payment more difficult. Rent has also skyrocketed which has also hindered the rental market.
The average 30-year fixed-mortgage rate in Sept. 2022 was 6.10% according to Bankrate.com and it is steadily on the rise. The Fed says there will be more raises in the future. This is making a lot of home buyers give up their deals and stray away from contracts to purchase a home. Many potential home buyers are concerned about purchasing due to the rising rates. Even with the rising rates, they are still among average levels over the last 30 years.
“The last couple years we, as consumers, got used to such a low rate. Now it’s our expectation,” Cory J. Phillips, a financial advisor at Pittsburgh-based Fort Pitt Capital Group.
Do not try to time a home purchase on the rate market. If it seems to be a good time for you to purchase a home now, then it is a wise decision to purchase now even with the rates rising. Make sure that you are interested in planting roots because it would not be wise to purchase a home and move within the next six years. If you did end up having to move the closing costs and commissions are likely to negate the benefits.
If renting seems to be the way you want to go, consider this, renting is still expensive. From 1985 to 2020, the national median rent price rose 149%. Unfortunately, the median income only rose 35% during this time according to data provided by Realestatewitch.com.
Potential homebuyers need to remember that the rent payment is temporary. “The premium you are paying to buy is not temporary; it’s a long-term commitment,” said Karl A. Wagner III, partner and senior wealth advisor at Milford, Pennsylvania-based Biondo Investment Advisors.
“I fear that we’re in a similar situation where excessive speculation and excessive liquidity and low interest rate have led to this real estate boom. We know historically that nothing goes in one direction forever. If it’s possible for you to wait, I would,” recommends Wagner.
