Rents Rose Once Again in January. Is It Time to Consider Buying Instead?

Tired of rent hikes? Here's how to know if buying is a good solution.

There was a time when landlords were so desperate to get leases signed that they were practically giving rent away for free (or at least a few months' worth). These days, the rental market looks completely different -- and it most definitely favors landlords.

Since demand for rentals has soared, many landlords are hiking up costs -- and tenants are paying because they simply have no choice. In January, the average multifamily rent rose 13.9% from the previous year, according to the latest Yardi Matrix Multifamily Report.

Now to be clear, when we talk about "multifamily," we mean properties with multiple units, like apartment buildings. Rents for single-family homes may have risen at a different pace.

On the plus side, Yardi says rents are unlikely to stay in the 13% growth range throughout 2022, so at some point, tenants could be in for some relief. But for now, renters are getting stuck paying up for their homes, to the point where it begs the question -- does buying make more sense?

Should you buy a home instead of renting one?

The upside of buying a home is getting to lock in a monthly mortgage payment that can't change over time (unless you refinance or sign an adjustable-rate loan). When you rent, your landlord could raise your costs the moment your lease expires.

But rising rents shouldn't necessarily drive you to rush out and buy a home. For one thing, right now, home prices are inflated on a national level, and inventory is quite limited. You may have a hard time finding a home that works within your budget.

Also, mortgage rates aren't sitting near record lows the way they were for most of 2021. If you get stuck paying a higher price for a home today, you won't necessarily enjoy a low-enough interest rate to make it affordable.

But present housing market conditions aside, there are certain responsibilities that come into play when you buy a home rather than rent one. For one thing, every little maintenance item or repair becomes your financial responsibility. That could really bust your budget, not to mention take up a lot of your limited free time.

Also, when you own a home, you're on the hook for peripheral costs like property taxes and homeowners insurance. And those costs can rise over time, so even if you lock in a fixed-rate mortgage, you're not necessarily guaranteed predictable housing costs.

What's the right call?

If you're tired of paying a small fortune for rent, you may be inspired to buy a home instead. And if you can afford one based on today's prices, that could end up being a savvy financial decision.

But before you make that call, think about whether you really want to own a home. If you're not particularly eager to take that leap, or you're unsure if you're ready financially, then you may instead want to focus on lowering your rent costs.

In that regard, you have options. You can negotiate with your landlord, find a roommate to split your rent with, or if your lease is ending soon, start scoping out homes with fewer amenities that come with a lower monthly price tag. You may not be able to help the fact that rent prices are up across the board -- but you can take some steps to minimize that burden for yourself if it's not the right time to buy a home.