As the pandemic set in, it triggered a year-long housing boom in the United States. Most would-be first-time homebuyers expected to purchase their dream homes.
A year later, a housing crisis is looming as acquiring a home increasingly becomes unachievable. This article examines why most people are choosing the next best thing–renting.
How Did the Dream Home Die?
An increase in construction costs, rising cost of housing, shortage of starter homes, changes in consumer desires, and competition from investors have caused a decline in the acquisition of residences.
The average price of a home in 2021 is $408,800, according to Statista. This is up from $389,400 in 2020, out of reach for most new homebuyers.
Investors are outbidding individual homebuyers by buying homes in cash and in large volumes, so there is an acute shortage and an affordable housing crisis.
Starters are facing the choice to go for fixer-uppers within their budget or rent better houses. For most, renting seems a more sensible option.
Costs Associated with Renting a Home
A) Application Fee
While house hunting, you pay a fee to view living spaces and apply to live in the selected space. This can range from $20 to $75 per adult, which the property owner can sometimes use to conduct a background check. It is best to narrow down your choices to avoid spending too much on application fees.
B) Movers’ Fee
To move your belongings from one home to the other will require hiring a mover. Your choice depends on the distance involved and your budget.
C) Security Deposit
As a tenant, you must pay a fee to assure your landlord that you will cover wear and tear as you leave the premises. This fee can be between 1-3 months’ rent. Sometimes, a bad credit rating will cause the landlord to demand more security deposit to cover the risk.
D) Garage Rental
Some homes have garage space or storage that requires you to top up the rent to access the additional area.
E) Renters Insurance
You pay renters insurance to shield your belongings from liability against flood, fire, and natural disasters. How much or how frequently you pay is dependent on the insurance company and their billing plan.
F) Pet fees
If you have pets, landlords who accept them on their property will consider them as additional liability. You might need to make a pet deposit. Depending on the landlord, it can be refundable or non-refundable, while some will charge you monthly rent for the pets.
Costs Associated with Buying a Home
A) Mortgage
A mortgage is a secured loan for a property. You are to make predetermined monthly payments, along with taxes and home insurance. While mortgage and interest payments are constant, insurance and taxes can fluctuate.
B) Home Owners Association (HOA) Fee
This fee, paid to the HOA, maintains the neighborhood within the residence. The HOA also comes up with regulations that you must follow.
C) Repairing Historic Registry Homes
If you buy a home under the Historic Registry, you must maintain its historic appearance. For repairs or adjustments, you must write an application and get approval from the Historic Registry.
D) Upkeep of the Home
As a homeowner, you periodically repair and maintain the roof, HVAC system, electrical systems, and general plumbing.
E) Utility Bills
Before moving in, you have to ask the previous owner for a history of their utility bills, as you will be liable for any amount due now the property is in your name. A review of the account will help you plan for any unforeseen costs.
Why you should rent instead of buy
It is desirable to own a home because you end up with a long-term asset when you acquire a home. However, property prices have gone through the roof that it’s only logical to rent a space.
A) To Avoid Extra Costs
As a tenant, the only financial commitment you make is a security deposit. On the other hand, you have to commit a hefty down payment as a home buyer, typically 6% of the loan value.
Moreover, the charges that come along with mortgage payments are, in most cases, higher than rent for the same property. Renting seems the easier option when you are on a tight budget.
B) Lack of Options
Housing prices have been increasing, worsened by the 1.8 million housing shortage. If you can only afford to own a home in a low-cost area in the suburbs, choosing to rent in a vibrant neighborhood at a lower cost makes more sense.
C) Renting as a lifestyle
Renting a house comes with freedom and convenience. Supposing you are in a profession where you must move periodically, like doctors. In that case, renting can be a convenient choice as you won’t have to stick to your home locale.
D) Convenience
Saving up for a down payment can take a while, so renting seems more affordable than buying. Then you’ll be stuck with mortgage repayments, which drag on for 10 years or more. Leasing allows you to invest the extra money in other projects.
What’s more, renting makes it affordable to live in a place you can’t afford to buy, which is a dream come true.
Conclusion
Owning a dream home is a desirable long-term goal, but the prohibitive housing prices make the goal unattainable for most people. In such a scenario, renting looks like a more feasible idea, but there’s one issue–can you rent an apartment forever?
Sure you can. And as more people are finding out, it makes more financial sense than buying a home. As prices continue to soar unchecked, there’s likely to be an army of forever renters.
