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Rent or buy? Even more muddled math is involved

The housing market in the US has been completely turned around. However, this new puzzling reality is confusing customers’ real estate plans rather than making the decision between buying versus renting, moving against staying put clearer.

Mortgage rates are skyrocketing. The 30-year fixed mortgage contract rate increased by 22 basis points to 7.16% in the week that ended October 21. The rate exceeded 7% for the first time in more than 20 years at that time. The Federal Reserve raised interest rates in order to tame inflation, which is what caused it. Another notable change from a little more than a year ago, when exceeding 3% was significant news, is this one.

My mother used to give me links to listings on Zillow for everything from rural California property to apartments in Jersey City. Her hobbies have changed as a result of the high rates.

Prices are decreasing in the meantime. That would seem absurd to locals in certain places where, only a few months ago, housing values were breaking significant records. But it appears that the decrease will be almost as severe as the rise: In 20 major US cities, a pricing index declined 1.3% month over month in August, the most since March 2009. Additionally, although prices are still rising year over year, they are slowing at a historic rate.

Rents are dropping as well. Additionally, rental markets are coming out from a frenetic period of rapidly rising prices.

However, that seems to be altering: In September, rents decreased month over month in 69 of the top 100 US cities. According to Apartment List, they increased 7.5% nationally in September compared to the same month last year, which is higher than pre-pandemic levels but lower than the highest increase of around 18% at the beginning of the year. The number of rental applications has decreased recently, and listings are remaining on the market for longer, especially in major boom cities like Las Vegas and Phoenix.

This calls for a disorganized game plan for tenants, prospective purchasers, and landlords. 

She outlines the advantages and disadvantages of renting versus buying right now: renting offers freedom but less certainty during a volatile housing market. Purchasing entails investing in stability and equity, but there is a chance that the market will be overheated with high mortgage rates.

A lot of this answer comes down to what your means are and how great your desire for stability is — and how badly you want to stay in the city, she writes. 

It’s challenging to base market predictions on historical data or conventional wisdom. Homeowners typically want to stay put when mortgage rates are higher in order to avoid paying more for a new loan. However, some data from Austin, Texas suggests that in the current economic climate, that may not be the case. More movers might increase the supply on the market, which would lower prices. However, a different sign predicts we won’t experience a crash as in 2007. The labor market, which is still at historically high levels, could support prices.

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