Ownership and equity are the main draws of homeownership. You aren’t “throwing away your money,” because you're building equity in your home. This equity can be used in the future to sell and leverage buying a larger home, if necessary, or help fund other financial goals, especially if you move to an area with a lower cost of living. Trouble is, that assumes a decent price appreciation and that it won’t take months — or even years — to sell when you’re ready to move. The requisite co-op approval can complicate the matter for New York homeowners who aren’t given total autonomy over choosing a buyer.
So much of this analysis comes down to the size of a home that you want or need and the location. Getting into a neighborhood on the precipice of being the next hot area is where the returns can truly soar.
However, a major consideration for homeownership in a chaotic rental market moves beyond the cut-and-dry reality of cost.
The mental and emotional labor of frequent moving is exhausting. Being unsure how much your rent could rise can trigger anxiety months ahead of a lease renewal. The cost of moving is high considering supplies to pack, professional movers, the hours of research and time spent viewing apartments, and, to top it all off, paying a broker's fee that could cost one month to 15% of annual rent. If average rent in Manhattan is teetering toward $4,000, then it could easily cost more than $6,000 to move before accounting for the security deposit.
Certain life choices will also limit housing options. At the time of this writing, if I enter a $4,000 max online for a one-bedroom apartment search in my neighborhood, 256 apartments show. If I filter for pets allowed (we own a dog), it drops to 176 apartments. Should we elect to expand beyond us two and our dog, we’d probably want a two-bedroom. If I filter to two-bedroom apartments, the results drop to 23. Then you have to compete with every other person on the prowl for a two-bedroom, pet-friendly apartment in our neighborhood.
Remember, though, buying a home is no picnic, and homeownership comes with its own set of frustration and costs. It also requires accounting for potential lifestyle changes, like expanding a family and outgrowing a home and having to sell and buy all over again, or buying more than you technically need from the start in order to grow into the space (the latter being potentially cost-prohibitive at the time you want to buy).
Frankly, the calculus between buying and renting real estate in New York City and across the nation is incredibly stressful these days. It feels as if there’s no right answer because either one is incredibly expensive and there are pros and cons to each option.
To rent means more flexibility and no headaches for when the unexpected pipe bursts or appliance breaks — but no guarantee for when it'll get fixed, along with less stability. To own means building equity for the future and having stability, but contending with a hot, potentially overpriced market and high mortgage rates. A lot of this answer comes down to what your means are and how great your desire for stability is — and how badly you want to stay in the city.
Erin Lowry is a Bloomberg Opinion columnist covering personal finance. She is the author of the three-part “Broke Millennial” series.