Ellie from Rockford, Illinois, recently called The Ramsey Show seeking advice about her housing dilemma. Her husband started a new job requiring him to relocate every two to four years, likely continuing over 12 years.
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Their current home is fully paid off but valued at $150,000 in a slow-growth market, so Ellie is wondering whether they should buy or rent in each new city, where she states that home prices range from $300,000 to $400,000.
Ellie’s concern isn’t just financial – she doesn’t want to live in a bare-bones apartment during this transitional phase of their lives. However, buying and selling homes every few years comes with significant risks.
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Dave Ramsey advised Ellie to focus on the local real estate market conditions in each new city to make her decision. He laid out two key factors for her to consider:
1. Home Price Appreciation Rates
Ramsey recommended asking a real estate agent to provide the average appreciation rate in a 5-10 mile radius around the neighborhood they want to live in and looking at those numbers over the past few years. Ramsey noted that markets with strong growth – such as 10% annually – could offer opportunities to build equity even in a short time frame.
2. Days on Market (DOM)
This figure measures how quickly homes sell in a particular area. Ramsey said that a hot market with low DOM (e.g., seven days) can make it easier to resell the house when it’s time to move again. However, in slower markets with high DOM, selling could become a costly and time-consuming process.
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Combining these two metrics allows frequent movers like Ellie to assess whether buying makes financial sense or renting is safer.
Recent U.S. housing market trends further highlight the risks of frequent home purchases. According to the Freddie Mac House Price Index, prices rose for 12 consecutive years, with an unprecedented 18% surge in 2021.
Since then, the market has cooled, with annual appreciation rates slowing to 4.8% in 2022 and 6.5% in 2023. While these growth rates still exceed the long-term average of 4.4% since 1990, the trend suggests that rapid equity gains are no longer guaranteed.
Additionally, rising mortgage rates have significantly impacted affordability. The average rate on a 30-year fixed mortgage doubled between 2021 and 2023, making monthly payments far more expensive. For Ellie and her husband, financing a $300,000 to $400,000 home at current rates would strain their budget and potentially reduce their retirement savings.
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Given the frequent relocations, Ramsey said, “Probably in most markets, you’re gonna be renting.” Renting offers a practical solution for Ellie’s situation. It eliminates the risks associated with fluctuating home values and the costs of buying and selling, such as closing fees, agent commissions and potential capital losses.
However, it is worth noting that the median rent prices across the U.S. have risen in recent years. According to iProperty Management, monthly rents have seen an average increase of 6.45% annually over the past four years, up from a 3-4% annual increase over the previous several years.
Ellie’s husband will receive a $3,000 monthly housing stipend, as well as increased wages and overtime. This will help with rental costs, providing a comfortable middle ground between saving for retirement – her goal over the next 12 years – and maintaining a quality living situation.
Ramsey emphasized that deciding whether to buy or rent depends heavily on local market conditions. He says renting is typically the smarter choice for short-term stays in areas with slow appreciation and high DOM. In faster-growing markets, he said that buying may still be worth considering if Ellie and her husband can sell quickly and profitably.
Ultimately, frequent movers like Ellie must weigh the financial risks of buying against the flexibility and simplicity of renting, all while keeping long-term goals – like retirement – front and center.
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This article Should We Buy A House Every 2-4 Years Or Rent? Dave Ramsey Weighs In On Caller’s Relocation Dilemma originally appeared on Benzinga.com
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