As a renter, there is likely an important decision to consider each year: renew your lease, start a new one, or buy a home. This year is no different. Before deciding what's best for you, though, it helps to understand the true costs of renting moving forward.

In the past year, both current renters and new renters have seen their rent go up based on information from realtor.com. "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."

And if you look back at historical data, that should come as no surprise. According to the Census report, rents have been consistently rising since 1988. So, if you're considering renting as an option in 2023, it's worth weighing if this trend is likely to continue.

According to the 2023 Housing Forecast, the prediction is that rent will continue to increase at 6.3%. As you can see in the graph to the left, a 6.3% increase in rent forecasted for the coming year, as compared to the blue bars, which represent increases renters saw since 2013. The 2023 projection does not call for an increase as drastic as previous two years' but it is still above average for yearly rent hikes during that 2013-2019 time period.

That means, if you're planning to rent again this year and you've not yet renewed your lease, you may pay more when you do.

Homeownership Provides an Alternative to Rising Rents

Rising costs may make you consider the benefits of homeownership. If you're looking for more stability, it could be time to prioritize homeownership. One of the many benefits of owning your own home is it provides a stable monthly cost that you can lock in for the duration of your loan. As Freddie Mac says," Monthly rent payments may increase over time, but a fixed-rate mortgage will ensure that you’re paying the same amount each month. With a fixed-rate mortgage, your interest rate is locked in for the life of the loan. Steady payments allow you to budget wisely and make plans for the future.”

If you’re planning to make a move this year, locking in your monthly housing costs for the duration of your loan can be a major benefit. You’ll avoid wondering if you’ll need to adjust your budget to account for annual increases like you would if you left your housing payment up to your landlord and their renewal cycle.

Homeowners also enjoy the added benefit of home equity; the latest report from CoreLogic shows that average homeowners gained $34,300 in equity over a 12-month period. As a renter, your rent payment only covers the cost of your dwelling. When you pay your mortgage on a house, you grow your wealth through the forced savings that are your home equity.

Bottom Line

If considering renting this year, be sure to remember the true costs involved. Let's connect to see how you can begin your journey to homeownership.