Chicago Real Estate

Should You Rent or Buy a House? Here's What a Finance Expert Says You Should Know

Elevated home and rental prices and tight inventory come against a backdrop that has seen inflation at a four-decade high

With mortgage rates rising, many potential buyers still staring down high home and rental prices, and sellers weighing their options, how do you when it's time to buy or rent?

Elevated home prices and tight inventory come against a backdrop that has seen inflation at a four-decade high, making homeownership less attainable, particularly for first-time buyers.

Although the average long-term U.S. mortgage rate edged down for the first time in two months this week, the slight decline comes after a swift ascent to levels that have not been seen in more than a decade.

After seven weeks of increases, the average rate on a 30-year mortgage inched down to 5.1% from 5.11% last week, mortgage buyer Freddie Mac reported Thursday. Last week's average rate was the highest since April of 2010. One year ago the 30-year rate stood at 2.98%.

Freddie Mac reported that the average rate on 15-year, fixed-rate mortgages, popular among those refinancing their homes, rose to 4.4% from 4.38% last week. One year ago it stood at 2.31%.

NBC 5 asked Sharon Epperson, a senior personal finance correspondent for CNBC, her advice for those questioning what they should do. Here's what she said:

Q: With interest rates going up, how are you currently advising people on the real estate market?

"Well, you know, you really have to assess if this is the right time for you to buy or move into a new home and get a mortgage. It may not be, but rents are also going up. So it's really another case of looking at what your priorities are and where you are right now. You know, before you can get into a mortgage, before you make a decision on whether to continue to rent or whether to buy, you've got to understand what your financial picture is going to look like in both situations. So do a budget for both cases. How much are you spending now on housing and how much will you spend in your new home if you decide to buy or rent another place? So those are some of the key things you need to do, but many people don't even know what it costs for them to live for one month. They've never written it all down. They've never looked at those numbers. Now is the time to do that. So you know where you stand. That will help you to side where you need to go next."

Q: Should potential homebuyers be worried with rates going up?

"If you have a down payment for a home already, if you have very little or no credit card debt, if you feel like you have enough savings - three to six months savings for emergencies, because there's always an emergency with a house... then you may be ready to do this. And you may want to take advantage of the fact that rates are where they are now and perhaps they could go higher. So you want to take advantage of it at this time. But if you've said no to any or many of those things, this may not be the time for you."

Q: What about refinancing?

"Well, you know, rates have certainly gone up. But one of the best moves that I made in the pandemic was to refi my mortgage. And I did it at a time, again, when we were seeing a lot of volatility in the markets back in March of 2020. And I talked to someone who is the head of retirement research at a major financial institution about what people should be doing with their overall investments and he turned to debt. He said, 'Well, you need to get rid of your liabilities, you need to reduce your liabilities and refinance.' Refinancing your mortgage can be a great way to do that. I expected him to talk about mutual funds, about different places to be able to put your money, whether it should be an equity or fixed income, but no, he focused on debt. And I think that it's a very good thing for people to think about. If you are able to lower your debt, refinance and make it a payment that is more affordable for you, or a payment that makes more sense for you long-term, then I think this is a time to look at refinancing your mortgage."

NBC Chicago/Associated Press
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