Rents Are Still Skyrocketing. Here's What You Need to Know.

From the gleaming skyscrapers of the Near North Side to the charming two-flats that dot Albany Park and Avondale, Chicago is full of all sorts of appealing options for homebuyers.

But with so many choices available on the Chicago market, one question looms larger than any other for those looking for a new place to call home this year: Is it better to buy or rent?

Let’s look at some compelling data and ongoing trends, which might help shed some light on this crucial decision.

Rents Are Continuing to Climb

For starters, check out this revealing data set from Keeping Current Matters:

As this graph helps to show, the price to rent an apartment has been steadily rising every single year since 2009 – and this trend continues today.

In fact, one recent report from Apartment List suggests that rents rose year-to-year at a rate of 2.8 percent between 2016 and 2017 on the national level. In Chicago specifically, rents climbed by two percent between ’16 and ‘17, according to findings from RentCafe.

That’s significant – particularly when you consider that rent growth substantially outpaces both the rate of inflation and changes in average hourly wages.

What’s more, studies indicate that more than a quarter of all renters – that’s roughly 11 million households – are severely cost-burdened. That certainly lines up with this report from Keeping Current Matters, which states that it takes nearly 30% of a person’s income to afford median rent, nationally.

What Do Rising Rents Mean for You?

According to that KCM report, it only takes about 15% of a person’s income to afford a median home – substantially less than what it takes to afford median rent!

When paired with other compelling data, this result suggests that buying may cost significantly less than renting – while offering even greater benefits to consumers in the long term!

As Javier Vivas, director of economic research for Realtor.com recently put it:

"Buying remains the more attractive option in the long term—that remains the American dream, and it’s true in many markets where renting has become really the shortsighted option… As people get more savings in their pocket, buying becomes the better option."

Consider, for instance, that consumers have ranked homeownership as the number one investment for years now, consistently valuing property ownership more highly than stocks or precious metals.

Why the love for homeownership? Well, in many ways, it remains the single most effective way to build your wealth over time; owning a home is a form of forced savings, allowing you to build equity while also offering you tax advantages. In contrast, when you rent, you are, as Realtor.com put it, “flushing money away;” you are helping your landlord build his or her wealth, while seeing no long-term benefits for yourself.

Studies also suggest that owning a home is often cheaper than renting on a month-to-month basis; in fact, it may be up to 24% less expensive to own a home than to rent in the Chicago marketplace! At the same time, when you purchase your home with a loan, you lock yourself into your monthly housing costs for years to come – meaning that you’re largely insulated from the market shocks that may cause rents to spike over time.

The Bottom Line

All of this information combines to paint a pretty clear picture – one that shows that, for those seeking homes in the Chicagoland area, owning may be a much more economical choice than renting.

This is particularly true for younger consumers who may be entering the housing market for the first time! In addition to serving as a major investment opportunity and helping millennials to avoid the rent trap, homeownership is easier than ever for younger people thanks to lower down payments, affordable mortgage rates, and flexible options like the adjustable rate mortgage.

So, to recap? Owning a home is a proven way to build wealth and secure your financial future in the long term, and pay less on a monthly basis in the short. Meanwhile, renting eats up more of your income, offers no investment benefits, and leaves you subject to the whims of the market (or a particularly greedy landlord).

With all this in mind, the choice between renting and buying becomes a little more obvious, no?

Have any more questions? Ready to start the search for your next Chicago home? Drop Real Group a line today to get the conversation started! Our experienced team is here and eager to put you in the place of your dreams. 

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