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- Many of my friends bought homes when mortgage rates were low during the pandemic.
- But even though they encouraged me to do the same, I’m glad I resisted the pressure.
- Home ownership is expensive and I have more flexibility as a tenant in New York.
During the pandemic, I’ve seen more than half of my group of friends become first-time homeowners. In 2020 and 2021, mortgage interest rates have reached historic lows. Many people I know felt the time was right to stop paying a few thousand dollars a month in rent and instead use that money to fund a lower than normal monthly mortgage rate.
When people around me tried to encourage me to do the same, I refused and continued to renew my lease on an apartment in New York.
This year, with skyrocketing rents and mortgage interest rates hovering around 7%, people are wondering if I regret my decision. The truth is that I don’t. Here are five reasons I’m glad I didn’t buy a house during the pandemic when interest rates were low.
1. I don’t have to deal with random repairs
There has been such a home buying frenzy during the pandemic that some people I know have bought homes without seeing them first or forgone inspections just to win a bidding war.
Because of this, they are now facing heavy repair bills to repair the dilapidated parts of their homes. If I had bought a house during the pandemic, I would have used the majority of my savings to fund the down payment. Additional costs for repairs would have potentially put me in debt, depending on the extent of the damage.
Now, when something breaks in my apartment, I place a work order and my building’s maintenance department fixes it at no additional cost. This is a perk of leasing that is a continued win for my personal finances.
2. I have the flexibility to move around
During the pandemic, about six in 10 American workers whose work could be done from home worked remotely all or most of the time, according to a Pew Research Center survey.
The shift to remote working has driven up demand for housing. Living close to the office didn’t matter so much to people anymore and if they could find a place to live with more space, that was a good choice.
As someone who worked remotely before the pandemic, buying a house would have meant trading my flexibility to work from anywhere. In 2019, I got rid of my lease and lived in new cities every month. Now that I feel more comfortable traveling again, I could end my lease in 2023 and do something similar.
If I was buying a house, I would have to find consistent tenants to be able to live this on-the-go lifestyle, which I wouldn’t be willing to do.
3. I am not responsible for any additional charges
For a brief moment, I considered buying a house. When I started researching how much it would really cost me, I realized you were paying a lot more on a monthly basis than your mortgage.
For example, additional monthly fees include home insurance and taxes, and in some cases maintenance and/or homeowners association fees, and more.
When calculating my costs, I realized that after putting down a 20% down payment, my rudimentary mortgage payments would be less than what I pay in rent each month. But with all the extras, I would pay $1,500 to $2,000 more.
4. Home prices seemed inflated
During the pandemic, demand for homes skyrocketed, causing inventory to accelerate. Some of my friends were in intense bidding wars for properties and others arrived at open houses to find that the house already had several offers, well above the asking price.
Because there was such demand, home purchase prices jumped. According to CoreLogic, home prices, nationwide, rose 20.2% year over year in May 2022 compared to May 2021.
The homes I had my eye on before the pandemic seemed to have nearly doubled in price over the past two years. It made me less interested in becoming a landlord.
5. Mortgage interest rates will fall further
One argument friends tried to use to convince me to buy a house was that mortgage interest rates were so low that they might never be so low again.
However, mortgage interest rates always fluctuate. While currently the 30-year average rate is above 7%, against a pandemic low of 2.68%, there is a good chance that during the decade they will fall again.
As someone who is not in a rush to buy a home, but would be considering doing so in the next 10 years, it is a good idea to watch for the next drop in mortgage interest rates. Until then, I will continue to be a tenant.
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