Why is it Difficult to Choose between Renting and Buying?

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When it comes to deciding whether to rent or to buy, many people are stuck weighing the pros and cons of each situation and still being left without a clear answer.

However, a recent infographic revealed by ForeclosureDeals.com offers a unique comparison of home prices and rental prices by state.  As you can see in this infographic, the real estate market over the last three years have resulted in a decrease of home prices and an increase in rental prices; therefore, potential homebuyers are more confused than ever when trying to decide between renting and buying. Do you pay an increase of approximately 60% to rent a property or do you take advantage of the 46% decline in home prices?

In short, choosing between renting and buying in the current real estate market is incredibly difficult, especially with the low home prices and high rental prices. Both options have pros and cons and in the end the buyer has to decide which option is best.

The Pros and Cons of Renting

Due to the foreclosure crisis and higher lending standards, rental demand has skyrocketed which has led to a rise in rental rates and a decline in vacancies. As a result, those looking to rent an apartment or home will more than likely have to pay significantly more today than they would have a couple of years ago.

Unfortunately, when you live in a rental property your hands can be tied in the sense that you cannot make permanent modifications. For example, if you wish to add a bathroom to your rental property, chances are you will be unable to do so. Furthermore, some landlords will not allow tenants to paint the walls of the house or install a satellite dish, so as far as “controlling your own space” goes, opportunities are limited.

Despite the limitations, there are some key advantages to renting a home instead of buying a home.

Fortunately, when you rent a property you get to avoid the undesired property taxes and repair bills. When issues arise that need maintenance, the landlord typically pays for these repairs, providing you with less money out of pocket. In the long run, renting a property tends to be less expensive than homeownership in normal situations (although today’s real estate environment, with higher housing supply and rising rental rates, is anything but normal).

The Pros and Cons of Buying

 When it comes to buying a house, the current real estate market is rich with investment opportunities due to the high foreclosure inventory currently in the nations’ markets.

First, the cons of buying. Buying a home means, among other things, paying property taxes, providing for the maintenance and upkeep for the home, and tying yourself to one particular location for a long time, unless you want to endure the hassle of selling your home and moving. One of the biggest cons to buying is the market. Today’s market is marked by falling home prices, which can place homeowners in negative equity situations and cost them dearly if the bottom falls out of a local area’s market, like it did nationwide in 2007.

On the other hand, buying has plenty of pros. As a homeowner, you are able to control your own space and make whatever changes you wish. More importantly, though, you get to grow equity and use your home as an investment. With renting, your rent is gone forever – there is no storage of value.

Plus, an abundance of cheap, affordable homes through foreclosure properties across the country means that the actual purchase is less expensive (up to 50% below market value) than it has been for a long time.

It is difficult to choose between buying and renting, but in the end, a decision must be made. Weigh your priorities and look at your financial situation, but remember to take into consideration the high rental prices and declining home prices. Renting may be cheaper in the short-term, but could cost you in the long run with lost equity and is 60% more expensive than 3 years ago. If rental demands continue to climb, so could rental prices. The inverse is true for buying a home. Choose the option that fits your circumstances and priorities and move forward confidently.