How to Avoid the Rental Trap in 2023: The Benefits of Homeownership

As rent prices continue to rise, it can be tempting to just accept the status quo and continue paying rent month after month. But there is another option: owning a home. While the upfront costs of buying a home may seem daunting, the long-term financial benefits of homeownership can be significant. For one, the monthly mortgage payments on a home are often lower than the monthly rent payments on an apartment. Additionally, as you make mortgage payments, you are building equity in the home – something that you don't get when you rent.

According to data from the Census Bureau, the median asking rent for a two-bedroom apartment in the U.S. reached an all-time high of $1,400 per month in 2022. If you're tired of feeling trapped in the rental market, it may be worth considering the benefits of homeownership. Even if you don't have a large down payment, there are programs available (such as FHA loans & many others) that can help make homeownership more accessible.

“Three out of four renters (74.2%) who have moved in the past 12 months reported seeing their rent increase. The strain from recent rent hikes isn’t exclusive to renters who have recently moved. Nearly two-thirds of renters (63.2%) who have lived in their current rental between 12 and 24 months, and likely renewed their lease, have also reported increases in their rent.”

According to a recent forecast, rent prices are expected to increase by 6.3% in the coming year. This projection, shown in green on the graph, is above the historical average for rent hikes between 2013-2019 (shown in blue). If you're planning to rent again in 2023 and haven't yet renewed your lease, it's likely that you'll face higher rent prices.

But buying a home is not right for everyone. If you have a stable job, good credit, and a reasonable down payment saved up, it may be worth considering. Do your research and talk to a financial advisor or mortgage lender to determine if homeownership is right for you. It may take some upfront work and planning, but it could be a financially smart move in the long run.

If you're considering renting this year, it's important to budget for these potential costs and to consider alternative options, such as homeownership. Connect with a local real estate advisor to learn more about how you can begin your journey to homeownership today.