Should You Rent or Buy a Home in the St. Louis Area?
Should I rent, or continue renting my home, or is it finally time to buy? This question probably crosses the mind of everyone at some point in their lives. There are many things to consider when you ask yourself this question. Your lifestyle, financial situation, your relationship, your job, and your future goals will all determine the best course of action. Additionally, things like the current real estate market conditions and current interest rates will probably be a large factor.
ATTOM Data Solutions reports that it’s cheaper to own a home than rent one in 63% of markets, particularly areas of the South and Midwest, such as St. Louis and St. Charles Counties. The U.S Department of Housing and Urban Development reports the median rent price for a 3 bedroom home in the Greater St. Louis Area is currently around $1311 and the median sales price for homes in St. Charles County in April 2021 was $277,000. At this price, a down payment of 5%, and interest rate of 3%, a homeowner would expect a monthly mortgage payment of around $1109.00 before taxes and insurance. This would be even less with a larger down payment.
Lower interest rates right now mean buyers can stretch their dollar further. It may be one of the best times to make the move from renting to home ownership, or for those looking for their first home, to decide to buy instead of rent to begin with.
Of course, you must think about the pros and cons of renting and buying, and evaluate what makes the most sense for you. If you are contemplating becoming a homeowner, here are some things to consider.
Rent Will Continue to Rise
According to a RentCafe.com recent report, the average rent in the St. Louis area is on the rise. Rent will continue to increase, and you really have no control over that. When your lease term expires, and time comes to re-sign a contract, typically every 1-3 years, you can almost guarantee the price will go up. If you purchase a home, as long as you obtain a fixed-rate mortgage, you will have the peace of mind knowing your mortgage will stay the same for the life of the loan (keep in mind taxes and insurance will likely fluctuate, but the mortgage payment will not change). A fixed-rate mortgage payment gives you stability and predictability in your monthly payments.
Building Wealth Through Equity
When you own a home, you are building wealth through equity. Equity is what your home is worth minus what you currently owe on your home. Every month when you pay your mortgage, you build more equity and therefore more wealth. As a renter, your monthly payments go to your landlord and do not build your own personal wealth in any way.
Making it Your Own
When you live somewhere, you probably want to make it your own. When you own a home, the flexibility to personalize and decorate your home is much greater. You are able to paint, landscape, and make upgrades (subject to guidelines from your HOA and the governing authorities). Since rental properties must be easily transferable to another, upgrades and personalization must usually go through the landlord, and will almost always be more restricted than when you own your home.
Flexibility to Move
Flexibility to move is one distinct advantage that renting has over home ownership. Renters have the flexibility to relocate when their lease is up and can often buy out of their lease to move sooner if they’d like. If you own a home and want to move, you will likely have to list and sell it. Although current market conditions have homes selling in an average of 5 days in St. Charles County, this will not always be the case. Selling your home can take time and effort, so you should consider your future plans when you decide if it’s time to buy.
Owning a home comes with tax deductions that renting does not. You may be able to deduct things like your mortgage interest, property taxes and homeowners insurance, reducing your tax bill and providing yet another financial advantage to home ownership. As a renter, these tax advantages are enjoyed instead by your landlord.
Renting and buying both have their own advantages and disadvantages. Much of it comes down to the stability of your living situation. If you are stable and happy in your career, and anticipate being in the same place for a while, home ownership probably makes sense. If things are up in the air and you are unsure what the future looks like, you may be better off renting until you find a place to put your roots. You should take time to evaluate all of the options with your current situation to decide what path to take. Your life situation is unique, and only you can decide if renting or buying is best for you in the stage of life that you are in right now.
If you are considering becoming a homeowner, we would love to connect to discuss your options. We can help you evaluate your situation, and present you with your options in the St. Louis area. Purchasing a home can become overwhelming, but with our expert team in your corner, we can make sure it is a smooth and informed process. We have worked with many first-time home buyers to find the perfect living situation for them. If you’d like to chat, fill out the form below, and a member of our team will be in touch!