Many may think that continuing to rent seems like a more viable option compared to buying a home. They choose to wait till interest rates come back down. For most, however, this is a mistake that will cost them money in the long run because many in the industry think that interest rates will continue their climb slowly upward.
If you're in the same situation, don't worry. Depending upon where you live, buying a home will still save you money over the long term. There are three things that make buying a home cheaper:
The simple fact is that higher rates mean a higher cost of owning. For most, rates would have to climb to over 10.5% in order for renting to be the better option.
Usually, mortgage interest and property tax payments are deductible, depending upon the state in which you live. The average American family is in the 25% tax bracket. On average, regardless of whether you own or rent, buying is 44% cheaper. If you only take the standard deduction, buying is still 35% cheaper than renting.
Staying put longer
The cost of buying and selling a home can be more than 10% of the home's value. If you stay in the home longer, you're able to spread those costs over more years. Forbes says that buying is 44% cheaper than renting if you stay put for 7 years, 37% for 5 years, and 20% for 3 years.
Based upon those three things, you would have to have a high interest rate, not take deductions and sell your home quickly in order for renting to be the better option.
The tipping point
Forbes discusses the tipping point, (http://www.forbes.com/sites/trulia/2013/06/14/buying-cheaper-than-renting-til-mortgage-rates-hit-10-5/) which is the interest rate at which renting a property is cheaper than buying it. Because of taxes and cost of living, areas primarily in California, New York and Hawaii have the lowest tipping point.
That being said, for every one of the top 100 largest metropolitan areas, buying is a better deal right now. Depending upon where you live, the tipping point ranges from 5.2% in San Jose, CA to 35.8% in Detroit.
If you're considering buying a home, although you may have missed THE PERFECT time to buy, now is still a very good time. Home prices are just beginning to rise and interest rates are still very low. Talk to a REALTOR to discuss your options.