Rent vs. Buy: Making the Right Choice in Philadelphia’s Market
You are at the point of your life where you need to decide whether renting or buying a home will be the better choice for you and your family. While both options have pros and cons, you need to make an informed decision about Philadelphia’s current real estate market. To do so, you need to research the average rent in Philadelphia and choose the type of property you would live in, along with all the conditions in the lease agreement.
Or, if you want to buy a house in Philadelphia, you need to research the best neighborhoods and the current listing prices. When you have the information, you can compare it to your financial situation and make a decision.
To help you, this text will make the factual distinction between renting and buying a home in Philadelphia.
The Most Important Factors That Help You Decide
You are beginning your thought process about renting or buying a home in Philadelphia. Think about the following three factors:
- Financial readiness – what is your financial situation, and what will it be like in five to ten years?
- Short or long-term plans – what are your plans for the future regarding family, job, and lifestyle?
- Market conditions – what is happening in the real estate market in Philadelphia right now?
Buying a home is cheaper than renting in Philadelphia.
Recently, a study published by Redfin found that Philadelphia is among four US cities where buying a home is cheaper than renting. The study covered the research of the 50 most popular Metropolitan areas and ranked them based on the monthly mortgage rates versus the monthly rent.
The findings show that 59% of properties in Philadelphia are cheaper to buy than to rent.
Buying versus Renting in Philadelphia
Here are some more stats coming from this study:
- The estimated median monthly mortgage cost is $1,869
- The estimated median monthly rent is $2,000
- Premium (%) of estimated monthly mortgage costs to rent: -6.6%
- Premium ($) of estimated monthly mortgage cost to rent: -$131
- Share of properties with estimated monthly mortgage cost lower than rent: 59.3%
Why is buying a home cheaper than renting in Philadelphia?
According to experts, buying a home in Philadelphia is cheaper than renting one because home values in those areas have stagnated compared to the country as a whole. This results from the growing number of houses available, more than the city’s population. During 2020 and 2021, Philadelphia had the most significant numeric gain in housing units, adding 24,701 units, according to the US Census Bureau.
Experts also don’t encourage people to stretch the limits of their budgets to buy a home when prices are falling because that would lead to a recession. Even though during the pandemic, some homeowners broke the rule to spend more than 30% of their income on monthly housing costs, back to the New Normal, things are a bit different. To buy a property and build equity, one needs to think harder about all costs included. Renters don’t build home equity but avoid the high costs of maintaining and selling a home.
If you are already stretching your budget to make a medium amount of the rent, you might think twice about investing it into buying a house. That means you must be financially ready so your credit score and savings won’t suffer. Always remember that purchasing a house implies a lot of upfront costs like down payment, closing costs, and ongoing mortgage payments, which you would have to earn and invest each month.
A retrospective of your long-term and short-term plans
The second factor that hugely influences your decision to rent or buy is how long you plan to stay where you live. Buying a home means waiting longer to get more financial benefits through appreciation. But if you predict that you will remain for less than two years, renting may be a more flexible option.
Maintenance and Responsibility
Another point of view that will help you decide faster is regarding maintenance and responsibility of the property. If you are renting, this will be covered by the landlord or the property manager, who takes care of maintenance and repairs. On the other hand, if you own the house, you need to take care of it yourself. Put that into the equation to decide whether you are willing to handle maintenance tasks in terms of time and financial commitment.
Tax implications
Lastly, explore the tax implications of renting and buying a house in Philadelphia. Of course, renters will benefit from fewer tax-related responsibilities, while home buyers can take advantage of mortgage interest and property taxes. For this, you need to consult a tax professional to explain how the text landscape in Philadelphia works.
Conclusion
Your buying or renting a house in Philadelphia is a choice that depends on your financial situation, the market changes, and your short-term and long-term goals and plans. While research has shown that Philadelphia is one of the four US cities where it is cheaper to buy than rent a house, it doesn’t mean everyone should do it. You still need to pay mortgage rates for several years, making you stay there for more than two or three years, committing finances and time to make the mortgage rates.
On the other hand, renting only puts you in one spot for several years, but you won’t build home equity with that option. In a nutshell, there are benefits for both options, and they are different for each individual. You need to find which ones will work for you.
