Most people grow up dreaming of owning a home someday. However, with the recent surge in home prices, some are contemplating the advantages to buying vs. renting in 2022. With home prices so high, is it worth buying a home? Or is it safer to rent right now? Let’s go over the market outlook for the remainder of the year and the advantages to buying vs. renting in 2022.
What Are the Advantages to Buying vs. Renting in 2022
There’s not exactly a clear answer to whether you should buy a house or live in a rental in today’s day and age. That said, both options have several pros and cons. So if you’re unsure whether you should buy or rent this year, here are some advantages to buying vs. renting in 2022.
Benefits of Purchasing a Home
- Home Appreciation– When you buy a home, you are the sole owner of the property, and it can appreciate over time. In the best case scenario, appreciation can provide long-term wealth.
- Tax Benefits– Purchasing real estate is one of the most significant financial decisions you can make. However, huge perks like tax write-offs can make the investment worth it.
- Consistent Mortgage Payments– When you take out a mortgage for a home, the payments are the same each month. However, when you’re in a rental, the owner controls monthly rental rates.
Disadvantages of Buying a Home
- More Financial Demands– Owning a home requires ongoing financial demands. For instance, you need to pay for maintenance, repairs, utilities, upgrades, emergencies, and more.
- Changes in Lifestyle– Buying a home doesn’t fit everyone’s lifestyle. For example, if you don’t like staying in one place for long or looking for a career change.
Benefits of Renting a Property
- Less Responsibility- Although you’ll likely need repairs or maintenance done at some point, you don’t have to worry about them–the property owner or property manager in Washington DC takes care of it.
- One Simple Payment– With one monthly rent payment, you don’t have to worry about a mortgage, utilities, closing costs, taxes, etc.
- Opportunity to Save Up– When you don’t have several things to pay for, you can save money while living in a rental.
Disadvantages of Living in a Rental
- Increasing Rental Rates– With rental rates continuously increasing, it can be more beneficial and similar in price to buy a home instead of rent.
- Less Jurisdiction– When you live in a rental home, you don’t have much say over the occupancy limits, pet policies, and other property rules.
Market Outlook For the Remainder of 2022
Although it’s difficult to predict what the rest of the year will look like, this year’s housing market has mimicked 2021 but is much less intense. In other words, home prices are still increasing, and it’s still a seller’s market. But what about the remainder of 2022?
Unfortunately, it doesn’t look like there will be any drastic changes within the housing market. It seems like housing inventory will remain low, and demand will remain high, just not as severe as 2021’s peak. Additionally, home prices are set to continue rising, but at a slower pace than we’ve seen this past year.
If you’re looking to purchase real estate in 2022, now’s the time to start searching and creating a plan. Remember not to overextend your budget and know exactly what you can afford. When creating a budget, researching property locations, specific housing markets, and rental rates is a good start. If you’re wondering about rising rental rates in the US, here’s a list to help you start budgeting.
Where in the US is Rent Rising?
Inflation has caused the price of goods and services everywhere to rise. However, some places are affected more than others. For instance, some areas of the United States are experiencing more drastic price increases and much higher living costs. That said, over the past year, rents in the Sun Belt rose at a rate of 22.5%. Additionally, between February 2021 and February 2022, rents in Miami alone increased 55%. Here’s a list of US cities where rental rates are rising quickly and their rate of increase.
- Miami, FL – 55.3%
- Orlando, FL – 35.4%
- Tampa, FL – 32.3%
- Austin, TX – 28.1%
- San Diego, CA – 25.4%
It’s worth noting that three of these five cities are in Florida, and the rest are in warm climates. As you can tell, people are moving toward warmer locations. As a result of the COVID-19 pandemic, more people are moving away from in-office city jobs and more toward work-from-home opportunities with a chance to be outdoors more.
Best Cities to Buy a Home vs. Rent
In the past, most people would recommend buying a home instead of renting for several reasons. Ultimately, it’s typically cheaper, in the long run, to buy a home vs. rent a property. However, times have changed, and now it’s not always better to buy a home.
People have to decide whether it’s best to buy a home or rent, depending on the market. Some areas of the US are better to rent, while others are better to explore buying. Here are some of the best cities to buy a home vs. rent.
- St. Louis, MO
- Cleveland, OH
- Pittsburgh, PA
- Tampa, FL
- Oklahoma City, OK
Although it’s best to buy a home in these cities instead of rent, it’s also getting more expensive to buy a home. With mortgage rates rising, the price of homeownership is also soaring. As such, investors and homebuyers must invest in profitable real estate.
Best Cities to Rent a Home vs. Buy
In some cases, renting is still cheaper than buying a home. For example, primary real estate markets like Los Angeles, Chicago, and other bigger cities are much more expensive than secondary or tertiary real estate markets.
With the rise of inflation and the increase in real estate prices, buying a home in the following cities can be extremely expensive.
- Chicago, IL
- Seattle, WA
- San Francisco, CA
- Sacramento, CA
- New York City, NY
Whether you’re looking to rent or buy, it’s important to know which cities are best for each scenario. Buying a home in any of the cities listed above would be more costly than renting. However, it’s essential for renters and investors to weigh the pros and cons of a more expensive yet accessible rental property.
What Does High Rent and Low Inventory Mean For Investors?
When rental rates are high and inventory is limited, it can affect investors significantly. For instance, it can be much harder to find new rentals and expand your investment portfolio. Additionally, higher rental rates and low inventory means a more competitive market. Ultimately, this combination can be frustrating for investors, as it’s hard to find fairly priced real estate.
Real estate investors need to perform market research and find profitable investment opportunities. After all, you don’t want to invest in an overpriced market where you’ll lose out on profits. So instead, find an ideal rental property location, learn the best time to buy, and thoughtfully plan out your next investment.
How Can You Maximize Your Rental Portfolio This Year?
Although renters are the ones looking for housing, it’s important for investors to keep up with rental market trends and tenant preferences. One way investors can explore the advantages to buying vs. renting in 2022 while running a successful rental business is by hiring property management. A successful rental property management team by your side can ensure you don’t have to stress about the day-to-day tasks of owning a rental business.
Bay Property Management Group offers comprehensive rental services to busy landlords, no matter how many properties you have. Contact BMG today if you need rental management services in Baltimore, Philadelphia, Northern Virginia, or Washington DC.