In the early stages of the COVID-19 pandemic, interest rates took a significant dip, which prompted many Americans to buy a home while mortgage terms were favorable.
The result was a buying frenzy toward the end of 2020 and into 2021. The trend was further propelled by the rising number of people working from home, as they looked for new spaces that could better accommodate their needs.
Since then, interest rates have climbed back up and home prices — which increased rapidly early in the pandemic — have begun to level off. The buying frenzy that we saw a few years ago is gone, but that doesn’t mean it’s not still a good time to buy. In fact, a calmer market might actually be the perfect time for new homebuyers to begin their journeys. Here are my top four reasons to consider purchasing a home instead of renting in today’s market.
Buying is a great investment
When you rent a home, you put money in without earning anything in the long run. If you own a home instead, you pay down the loan amount every month while also expecting a return on your investment over time.
Markets fluctuate — sometimes rapidly, as we’ve seen since the start of the pandemic — but buying a home is generally a sound investment, as sales prices have climbed steadily for the most part over the past few decades1. Interest rates also go up and down, though even with current rates up since 2020, they’re still below the figures we saw from the 1970s through the early 2000s2. Put this all together and it remains a smart time to buy.
You have the flexibility to make changes
If you’re a fixer-upper, homes give you the opportunity to make renovations or upgrades. That’s typically not an option with rentals.
Home projects take time and hard work, but the benefit is a living space that is customized to your unique needs. Plus, renovations can increase your home’s value in the long run.
There are possible income tax benefits
Homeowners may be able to deduct mortgage interest and property taxes on their tax forms. You’ll want to consult with a tax advisor about your individual situation, but this can be a key reason for deciding to buy a home.
Your mortgage payments stay consistent
With fixed-rate conventional mortgages, you’ll have predictable monthly payments that help you budget over a long period of time. Mortgage payments can often end up being lower than rental payments, too.
An added bonus, of course, is that mortgage payments will eventually go away. As noted above, you’re paying down a loan over time. Once it’s paid off, you no longer need to put money in, and you can instead sit back and enjoy your investment.
There are other benefits of owning a home that have less to do with finances, such as the stability of being in the same place for a long time or the sense of community that homeowners often develop with each other in their neighborhood. All in all, buying a home remains a good idea, even when financial markets happen to go up and down.