The economic consequences of the coronavirus pandemic suggest that the real estate market will have difficulties in 2021. Reuters has stated that it “expect[s] house prices to stagnate in 2021”.
While this might come as troubling to some, it does present an opportunity for property buyers and movers. With property prices staying still, this means that the real cost of renting or buying a house will actually decrease.
That being said, which is better in 2021? Renting or buying a house?
We’ve taken a look at the renting vs. buying pros and cons for the following year, so that you can make a property move that suits your circumstances.
Let’s start with the state of real estate.
The Real Estate Market
While exact predictions are difficult to make, one thing’s for certain about the 2021 vision for the housing market: COVID-19 will be a significant influencing factor.
We’ve already seen mortgage application rates drop by almost 18% due to the fear of financial instability onset by the coronavirus. Meanwhile, a recent poll conducted by The National Survey of Realtors showed that 44% of estate agents’ clients have postponed buying property until the pandemic has ended.
While this appears to be doom and gloom, this presents a great opportunity for home buyers.
Requirements for getting a mortgage approved will be relaxed with mortgage application rates dropping. Likewise, interest rates on mortgages have already fallen to record lows this year, and there are no signs of this fall letting up.
At the same time, the mass postponement of property purchases weakens housing demand. This lower demand gives power to the home buyer, meaning better prices and moving conditions.
Which wins: Buying a house
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The Economy
To state the obvious, the economy has suffered greatly at the hands of business closures, working from home measures, and lockdown restrictions.
More than 26 million Americans have filed for unemployment benefits since the pandemic began. This has triggered a $2 trillion government relief package for people who’ve found themselves out of a job.
What does this all lead to? Economic uncertainty.
A period of international economic downturn has led to many people reducing their personal spending and consumption. The fear is that a global recession could be on the horizon.
In terms of the economy, it makes sense as a home mover to rent first before signing up for a full mortgage. An unstable job market means that taking on the financial commitment of a mortgage could be risky for some people, particularly those that work in the travel, tourism, or service sectors.
Which wins: Renting a house
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Personal Finances
Ultimately, the most important thing to consider is your own financial situation.
If you’re considering renting vs. buying a house then you’ve got some money stowed away.
The question is: how much relative to what you’re looking to buy or rent?
Another question to ask yourself is how long you’re planning on living in your new property for. If you want a short-term move and are looking to rent, then the financial commitment is likely to be manageable. Alternatively, if you’re looking to quickly flip a property, the investment is less likely to yield a big enough payoff to be worth the financial risk.
On top of that, your financial history could play a key role in being able to buy or rent in the first place. If you’re looking to buy a home with a checkered credit rating, this could be a significant factor in whether your application is successful.
Which wins: Totally depends
The Bottom Line
If you’re asking when to rent vs. buy property, think first about yourself and then the market.
While conditions might be favorable to buy or even rent property in 2021, your own financial circumstances may not permit it.
Investing in property is a massive life event and not a decision to take lightly. If you find yourself under the right financial conditions though, then declining interest rates and lower competition from other buyers could put you in a strong position to get a great deal on that house you’ve always dreamed of!