Feb 18, 2022 Real Estate

Is It Better to Buy or Rent a Home in Omaha, Nebraska?

Whether you’ve lived here for a while or you’re transferring from out of state, you may be asking yourself the age-old question: is it better to buy or rent a home in Omaha, Nebraska?

As a real estate company, we are pretty passionate about the benefits of homeownership, especially in Omaha, Council Bluffs, Lincoln and the communities surrounding each city. And yet, we understand that buying a home is not feasible or wise for each and every person and their unique situation. There are several factors that contribute to this conversation, including the statistics of the local real estate market in Omaha and the intentions and lifestyle of the potential buyer.

In short, the answer to the question is that it is better to buy a home in Omaha than to rent, primarily based on the long-term benefits from a financial perspective. However, let’s explore the data supporting this and a few of the situations in which it may be wiser to rent in Omaha.

Prices Are Going Up

Is It Better to Rent or Buy a Home in Omaha, Nebraska?

Back in 2017, Omaha was included on the top 10 US Cities Where It’s Cheaper to Buy Than Rent, based on data from SmartAsset. The company gathered data on the average rent and home prices in the 100 largest metro areas in the country, comparing the total costs of a typical home in each area for a household earning $100,000 a year. At the time, the cost of an average monthly mortgage payment in Omaha was $583 and the average monthly rent was $1,255, so it was clearly more wise to buy than rent and you only needed 1.63 years to break even.

Since 2017, home prices have steadily increased, which makes it that much more pertinent to get involved in the market sooner rather than later. According to Movoto, the median list price of Omaha homes was $329,500 in December 2021, which jumped significantly from $220,000 in 2020. The pandemic certainly played a role in this increase, as the housing market reached historic heights, due to low interest rates and other factors.

ATTOM Data’s Rental Affordability Report

Is It Better to Rent or Buy a Home in Omaha, Nebraska?

Each year, ATTOM Data Solutions releases a Rental Affordability Report, which outlines just how many U.S. counties favor owning over renting. In their 2020 report, the study showed that it was more affordable for the average wage earner to buy than to rent in Douglas County, as the median house sale in 2019 was just $181,000.

Even more recently, ATTOM released their 2022 Rental Affordability Report, which found that owning a median-priced home was more affordable than the average rent of a three-bedroom home in 58% of the 1,154 counties that were analyzed. This time, it reported that it was cheaper to rent than to buy in Douglas County, as the average three-bedroom rent for 2021 was $1,388 and the average home price from January–November 2021 was $225,000. On the other hand, the study found that it was cheaper to buy than to rent in Pottawattamie County, which encompasses Council Bluffs and its surrounding communities.

Renting vs. Buying a Home in Omaha

Is It Better to Rent or Buy a Home in Omaha, Nebraska?

With this information in mind, you may be leaning towards renting. But not so fast! There are several reasons why owning a home may make more sense in the long run.

How Long Are You Staying?

The most vital question to ask yourself is: how long do I intend to stay in Omaha?

If you are only planning on staying for a year or two — or you just aren’t quite sure how long you’ll end up staying — you may want to consider renting at the onset with the intention of reevaluating after a certain time period.

You might sign a 6–12 month lease for your first place, then start the home search process as the lease nears its end, so you can transition to a more permanent residence — one that will give you a return on your investment in the long-run.

Rent Prices Are Increasing

It’s no secret. Rent prices are constantly changing, typically in favor of landlords and their pockets. And this is something a renter cannot control or predict, which causes a sense of uneasiness — or worse, the possibility of being forced to relocate because you can no longer afford your rent.

Meanwhile, when you own a home, you are locked into a predictable mortgage payment — and with relatively low interest rates (for now!), that payment is certainly reasonable.

The Financial Benefits of Homeownership

If you are planning on being in a home for longer than a year or two, it typically makes more sense to buy from a financial perspective.

Some of the main financial advantages to homeownership include tax deductions, building equity, stability in payments, an increased credit score, and more.

In short, when you are renting, you are essentially giving up money on a monthly basis that you will never see again. It’s like putting your money in a no-interest checking account as opposed to placing it in an investment account, which has the potential to see gains over time. On the other hand, when you pay your monthly mortgage bill as a homeowner, you begin to own just a little more of your home each time. Your equity increases 1) as the value of your home goes up and 2) as you slowly pay off more of your loan.

Not to mention, there are a few tax deductions you can take advantage of and other perks related to homeownership. Need more details? Here is an overview of some of the major financial benefits of homeownership.

Measure the Risk vs. the Reward

Keep in mind that it’s not as simple as gaining equity and taking advantage of deductions. There are both risks and rewards associated with renting and buying, and you should be aware of it all before you go into it.

There are several risks and potential downfalls associated with homeownership, including unexpected maintenance costs, the potential for home depreciation, and a sudden change in your financial situation. While many of these things are outside of your control, there are ways to combat these outcomes. For example, a well-maintained home can help increase its resale value. Or if your financial situation changes, you may consider renting out your home and finding a more affordable apartment to rent for a while.

At the same time, you have to weigh the rewards as well. And the rewards for homeownership are many! One of the most obvious benefits is the fact that the market directly impacts your financial success. So if the market goes up and you own a home, you benefit. If the market goes up and you are a renter, your landlord may (and likely will) increase rent to keep up with trends. And if the market takes a downward turn, it is wise to wait on selling your home. And at the end of the day, you have more options and control over your financial future as a homeowner.

Establishing Roots

Unrelated to the financial benefits is the fact that you are able to more easily put down roots in a community when you have buy-in. It is much easier to provide stability for you and your family when you own your home and know you’ll be stationed somewhere for a while. Studies show that those who own their home are more likely to get involved with their local community, through volunteering, joining neighborhood groups, or simply taking the time to get to know their neighbors.

Looking to Buy a Home in Omaha?

We can help! Our agents are extremely knowledgeable about the local market in the Omaha area. Start your home search today and contact us with any questions related to buying vs. renting in Omaha.

Feb 18, 2022 Real Estate
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