Expert says people should consider finances and lifestyle when deciding to rent or buy a home

COLUMBIA, Mo. (KMIZ)

Columbia resident Angela Keller is hopeful her family can buy a home in the near future, but for now, they just renewed their lease.

Keller's family can't just purchase any home. She said they're looking for a home that is ADA-accessible for their daughter, Renesmee. The 3-year-old girl is an amputee, with a single ventricle heart.

"I want something for my daughter to be able to have when she grows up," Keller said. "As special needs, you don't have a lot of options. I just want her to have someplace she can call her home."

In the meantime, Keller said her family is using this time at their rental to build up their credit and savings. She and her family went through Love Columbia's transitional housing program last year and worked with budget coaches before signing a lease on an apartment.

Keller said they're now hoping to buy a house in the next year.

"We'll continue taking what we learned in our Extra Mile budget program and continue to just refine that budgeting plan and getting savings put away and also building our credit," Keller said. "The higher the credit, the better chance you get pre-approved for a house."

When deciding to rent or buy a home, realtor Shawna Neuner said people should consider their financial situation and lifestyle.

With over 30 years in the housing industry, Neuner has experience in both buying and renting. She is on the board of directors for the Columbia Board of Realtors and serves on the boards of the Columbia and Missouri Apartment Associations.

Financially, Neuner said people need to consider how much they can afford on a down payment. She said the higher the down payment, the better interest rate a buyer will get.

It is also typically easier to qualify for a rental than it is for a mortgage.

Keller said they are currently relying on her husband's income and she has a personal goal of getting back into the workforce and getting a credit score above 600. She said if they have more income, they will be able to qualify for a bigger loan.

Neuner also said people should also consider if the expenses of owning a home are worth it, such as inspections, appraisal and insurance.

"Sometimes you just kind of have to put pen to paper and do that math to figure out, 'This is what it's going to take,'" Neuner said.

Neuner said home prices typically go up in value over time, so most homeowners can sell the property for more than they purchased it. However, they should consider how long they will be in that home.

Generally, she said if people are only going to be in a location for a couple of years, it might be smarter to rent than buy, but that can also depend on market factors.

"If you are going to be there for one or two years, will the expenses of purchasing outweigh the benefits of owning?" Neuner said.

Another lifestyle factor to take into consideration is if people have the resources to maintain a home. As a renter, maintenance is usually taken care of by the landlord. As a homeowner, that responsibility now falls on the buyer.

"When you are that homeowner, you're the one taking off work to be able to be there and let the contractor in, you're the one that is taking that financial liability and risk," Neuner said.

This is a factor that the Keller family has already considered as they work to build up their credit and savings.

"Looking at how much it costs to replace a refrigerator or replace a stove or a hot water heater, that's the whole point of building up our savings account," Keller said.

While this might be a hassle, Neuner said a pro to homeownership is that the owner has control over the home, including details like what color to paint the interior. On top of this, there are also tax benefits, pride of ownership and home equity.

"Typically, homes appreciate in value. Real estate appreciates," Neuner said. "So, over time you're earning money, increasing the value of that home just by owning it."

Because of this, she said it is typically wiser to buy and invest in a home rather than rent if people have that ability.

However, Neuner said costs of owning a home have all gone up in the past year.

Data provided by Boulevard Realty shows in the past year, utilities have increased by 15% while taxes have increased by 5%. On top of this, things like cleaning, maintenance, insurance, repairs, supplies, appliances, remodeling and landscaping have all collectively increased by 25%.

Statistics from Columbia Board of Realtors show the average sold price of a home in Columbia was $373,309 in August, up 5% compared to August 2023.

But these prices don't only impact homeowners. Neuner said when inflation impacts homeowners, it also impacts tenants.

"One of the things that we see quite often is ... rents actually lag behind sales prices," Neuner said. "As home prices increase, rents usually increase at a slower percentage than home rates do."

She said this lag is due to landlords feeling the impacts of inflation, but not wanting a large jump in rent costs for their tenants from year to year.

This comes as the Federal Reserve cut interest rates by half a percentage point earlier this month.

Neuner said interest rate cuts always bring more buyers into the market, but Columbia Board of Realtors CEO Brian Toohey previously told ABC 17 News he doesn't expect the cut to largely impact mortgage rates.

Neuner said Columbia traditionally has a steady housing market.