“Should I rent or should I buy?” – is a question we get asked a lot.
If you are keeping up with home prices in your area, or if you live in the Palm Beach County and follow our monthly housing market report, you have undoubtedly noticed that home prices have been going up.
In fact, they’ve been increasing nationally, and locally, almost uniformly (with just a few brief exceptions) for the past 107 months!
In 2020, home prices went up by more than 8% nationally, according to Case-Shiller National Home Price Index.
So, naturally, many of our clients are wondering if they should be renting when home prices are so high.
Well, it turns out, in 2021 it’s still more affordable to buy a home than to rent one.
For starters, higher home prices bleed into higher rental rates. It’s like when the cost of inputs goes up, the price of output goes up too.
Also think about it this way: if rent is low and home prices are high, landlords would be tempted to sell rather than continue to rent their property out, thereby squeezing the supply of rental units and pushing rental rates higher.
Furthermore, according to ATTOM Data Solutions 2021 Rental Affordability Report,
Owning a median-priced three-bedroom home is more affordable than renting a three-bedroom property in572, or 63 percent of the 915 U.S. counties analyzed for the report.
That has happened even though median home prices have increased more than average rents over the past year in83 percent of those counties and have risen more than wages in almost two-thirds of the nation.
How is this possible?
The answer is historically low mortgage interest rates.
Scroll to the bottom of our housing market page and have a look at the recent mortgage rates chart, sourced and updated live from the St. Louis Fed.
In 2020, mortgage rates reached all-time lows 16 times, and so far, they are expected to continue hovering in low territory for another couple of years. These low rates are a big factor in driving affordability.
The Bottom Line:
If you’re considering buying a home in Jupiter, Palm Beach Gardens or in the 25-mile vicinity this year, contact us today to learn more about home buying options that match your budget while affordability is still in your favor.