Why It Might Pay to Keep Renting in 2022

It's definitely not an easy time to buy a home.

The upside of renting a home is having a predictable monthly housing payment to fit into your budget. The downside, however, is getting nothing in return for your money.

When you own a home, you can build equity in an asset whose value can grow over time. You also get the stability of having predictable monthly mortgage payments (assuming you sign a fixed-rate loan), and you don't have to follow a landlord's rules. That could give you more flexibility when it comes to things like owning a pet or using your home for business purposes.

But while homeownership certainly has its benefits, 2022 may not be the best time to buy a place of your own. Here's why continuing to rent could make more sense for another year.

1. Home prices are really high right now

The median listing price in January was $375,000 according to Realtor.com, which represents a 10.3% uptick from last year and a whopping 25% increase from January 2020. Because home prices are so high right now, a lot of buyers might struggle to afford one. If that includes you, renting this year could benefit you in two ways.

First, it could give you a chance to wait for home prices to come down. Secondly, it could give you an opportunity to sock away more money to put toward a down payment.

2. Mortgage rates aren't ultra-competitive anymore

Though today's mortgage rates are fairly attractive from a historical perspective, they're nowhere near the lows we saw earlier on in the pandemic. In fact, as of this writing, the average interest rate for a 30-year fixed loan is just a notch above 4%.

If you continue to rent for another year, you'll give mortgage rates time to settle, since they've risen pretty dramatically since the start of 2022. Granted, in waiting, you might run the risk of rates going even higher. But rates could also come back down in 2023 after a brief rise this year.

Without a crystal ball, we can't predict exactly how rates will trend. But because home prices are so high right now, it doesn't necessarily pay to push yourself to buy when mortgage rates are no longer low enough to offset those outrageous prices.

3. Inventory is low

The inventory of available homes to buy is 9.1% lower now than it was at the same time last year. That means you'll have limited choices when it comes to finding the right home. You might also get stuck paying more for a home due to not having more options. And so that's another good reason to keep renting -- to give the housing market more time to open up.

You may be eager to stop renting a home and embark on the process of buying one instead, but right now, the housing market just isn't friendly to buyers. Renting for another year could make sense. If your rental is affordable and you're not looking at a rent hike anytime soon, you might consider staying put to boost your savings and wait for the housing market to equalize so sellers don't have such an upper hand.