This Year, Renters Missed Out on $51,500

Rents have increased significantly this year. According to Apartmentlist.com’s newest National Rent Report, rents are growing at a considerably faster rate than they were in the three years preceding up to the pandemic:

“Since January of this year, the national median rent has increased by a staggering 16.4 percent. To put that in context, rent growth from January to September averaged just 3.4 percent in the pre-pandemic years from 2017-2019.”

Rent increases are nothing new, as we can see when we look back. Over the last 33 years, the median rental price has risen steadily (see graph below):

If you’re considering renting for another year, keep in mind that rents are expected to rise considerably more next year. However, this does not provide a complete picture of the full cost of renting.

Renters Are Expected To Lose Money This Year

A homeowner’s monthly mortgage payment not only provides them with a place to live but also serves as an investment. As a homeowner makes monthly mortgage payments to pay down what they owe on their house loan, that investment accumulates in the form of equity. Home price rise, which is near-record levels this year, boosts their equity even more.

According to CoreLogic’s newest Homeowner Equity Insights study, homeowners acquired considerable wealth from their home equity over the previous year. The study shows:

“. . . the average homeowner gained approximately $51,500 in equity during the past year.”

You don’t get the same benefit as a tenant. Your rent payment solely covers the cost of housing and any amenities that are provided. You don’t get any of your monthly rent payments back as an investment. That implies that if you rented this year, you likely spent more in rent than you did the previous year, and you also missed out on a $51,500 potential wealth gain from owning your own house.

Bottom Line

Keep in mind how much renting can cost you while determining whether to rent or purchase in the future. Another year of renting means paying higher rents and missing out on the opportunity to grow wealth through home equity. Let’s connect today for you to learn more about the advantages of purchasing rather than renting.