RENTING VS BUYING
The housing market is expected to crash any moment now…
The U.S. Federal Reserve announced recently that they would be increasing the federal funds rate by .75%, which is the largest increase since 1994.
The increase is designed to slow inflation by making it more expensive to borrow money while decreasing the demand to borrow.
In 2020 and 2021, when interest rates were at historic lows, the demand to borrow was very high because it was so much “cheaper” to borrow, enticing more Americans to get loans.
Will this Affect You?
The Fed has officially burst the bubble, and the long-awaited recession is on the horizon.
The recent rate hikes will affect everyone, even if you’re not planning to borrow money. The increased interest rates will impact all households… people will lose jobs as a result of this and everyday life will be affected.
Keeping this in mind, many are questioning whether or not they should rent or buy…
Adam Sosnick, the host of SOSCAST on Valuetainment Money, says there are a few things you need to consider before making this huge decision.
There is no right or wrong answer, it just depends on you and your family’s situation.
When You Should Buy:
Buying a house is a huge commitment.
If you are ready to settle down and have a family, buying may be the better play.
If you plan on staying in the same community for a decent period of time, (at least 5-10 years), buying would be a better choice.
“You should only buy if you have a well-thought-out plan for the future. Owning a house is a huge responsibility. There are three major expenses that come with home ownership: insurance, property taxes, and maintenance costs which include unexpected expenses” says Sosnick.
Not only that but purchasing a home could create bigger problems in the future.
If you anticipate big changes in the near future, like a potential career promotion or job re-location, purchasing a home is completely unnecessary.
Young people should not focus on owning a home at this stage in their life, unless they want to be real estate professionals. There are so many variables that come into play while you’re young, causing you to regret the decision after only a few months.
Sosnick says, “Generally speaking, if you’re in a position where things are constantly changing in your life, don’t buy.”
When it comes to buying, you never want to make impulsive decisions, especially during this very turbulent economy and housing market.
When You Should Rent:
Renting is a great option for people who prefer the flexibility that comes with it.
People typically prefer renting a home because of the flexibility it offers.
Young people in particular and recent college graduates may decide to live in different cities or communities to see what they like best.
“There is a lot of instability in your life when you’re young. You’re still trying to figure out who you are, what you like, and what your future aspirations may look like. This is the time to focus on your career, build a business, and try new things like travel and explore to see where your life’s journey takes you,” says Sosnick
Maybe you’re in a committed relationship and expect to get married soon. Maybe you hope to move in with your best friend who is graduating from college next year. You never know what might happen that will cause you to change your mind.
If you don’t know your next 5 moves in life, DON’T BUY.
Part of the beauty of being young, independent, and not “tied down” is the freedom you have. When you’re 40 years old with 2 kids, a dog, and a stable career, you may not have the ability to pick up and move to Barcelona after your lease ends.
“Renting is absolutely the way to go if there is a lot of instability in your life or if you prefer the flexibility of changing up where you live.”
If you have lots of debt, owning a home is not a great decision. Don’t add to the pile of debt and make things worse for yourself.
And anyway, a 45% debt ratio is about the highest ratio you can have and still qualify for a mortgage.
Focus on saving and minimizing your expenses while you rent, that way, when the time is right you have the ability to buy.
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➡️ READ MORE: The Importance of Choosing the Right Location For Your Business
ABOUT THE WRITER:
Elena Patestas is a journalist and writer for Valuetainment media. She attended Pepperdine University in Malibu, California, and Adelphi University on Long Island, New York. She was born and raised in Roslyn, New York, and currently lives in Miami, Florida.
Elena is passionate about bringing positive change to our world and believes education is the root to solving many societal problems. After overcoming a chronic health condition, Elena became passionate about health and believes food is the key to preventing dis-ease and achieving optimum health.
Amongst her many goals, she hopes to bring positive, impactful change to our world to create a healthy, financially sound, and unified society.
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