Buying a home is 44% cheaper than renting -- maybe

Trulia's analysis finds that purchasing is cheaper than renting in all major U.S. cities -- if you can get the best interest rate, itemize deductions on your tax return and plan to stay at least 7 years.

By Teresa at MSN Real Estate Mar 20, 2013 9:23AM

© SuperStockIt’s the perennial question: Should I buy or rent?

 

If you don’t have good credit and a secure job, you may not have a choice, because you may not be able to get a mortgage. But those who do have a choice are giving a lot more thought to whether to buy, which once seemed a no-brainer.

 

According to a new analysis by the real-estate portal Trulia, buying is 44% cheaper than renting, even in large, expensive metro areas such as New York and San Francisco. Rising home prices haven’t changed the equation much. Last year, buying was 46% cheaper than renting.

 

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All things being equal, does that mean you should buy?

We’ll give that a definite maybe -- because all things are never equal.

 

In doing its analysis, Trulia made certain assumptions: You are planning to keep the house at least seven years, you put 20% down, you got a 30-year mortgage at an interest rate of 3.5%, you were in the 25% tax bracket and you itemized deductions. If your situation is different, YMMV – your mileage may vary, and buying may not be the deal it appears to be.

If you want to see what happens with higher mortgage rates, a different tax scenario and/or a different amount of time in the home, Trulia has an interactive map.

 

As with every real-estate story, the other major factor is where you live.

If you live in San Francisco, for example, buying is only 19% cheaper than renting. Change one of the assumptions, and you may find renting a better deal. In contrast, buying is 70% cheaper in Detroit, and it may be the better deal even if you have to pay a higher interest rate, don’t itemize your taxes and stay fewer than seven years.

 

The other cities where the line between buying and renting is smaller: Honolulu; San Jose, Calif.; New York, including the New Jersey suburbs; Albany, N.Y.; Orange County, Calif.; San Diego; Los Angeles; Long Island, N.Y.; and Ventura County, Calif., in that order.

 

The cities where buying is at least 58% cheaper than renting, after Detroit, are Dayton, Ohio; Gary, Ind.; Cleveland; Warren-Troy-Farmington Hills, Mich.; Toledo, Ohio; Memphis, Tenn.; Kansas City, Mo.-Kan.; Birmingham, Ala.; and Indianapolis.

 

Zillow, another real-estate portal, sliced and diced its data another way, coming up with the 10 largest cities where it takes the longest to break even if you buy rather than rent. Using its methodology, the cities where it would take the longest to break even are New York, Seattle and Boston. All were under the seven-year point used in the Trulia analysis.

 

Should you rent or should you buy? You’re going to have to do your own personal math before you decide. 

 
42Comments
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wow and there just now realizing that way to go msn.
Apr 6, 2013 5:06PM
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after reading some of these comments i had to post. In my case buying is cheaper. I'm a landlord and am renting out a $134k house for $1000/month. mortgage is about $600 add in all the expences and i'm profiting about $200 a month. so, with this house it's $2400 a year cheaper to buy it. yes there are repairs (amoung other things), but it just lowers my yearly rental income then i'm taxed  on that lower amount.

 

 So you people that don't agree, that's fine... come and rent my house, pay my mortgage, and I'll take the extra and put it towards my Benz payment. :) Oh and once you're done paying off my mortgage, i'm just going to pocket that $1000

Apr 6, 2013 4:28PM
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Is your job is secure?  Who here feels secure about their job 10, 20 , or 30 yrs from now?  Huh boomers?  You say we're finished after 50 in the job market right?
Apr 6, 2013 3:17PM
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My house is paid for but I still feel like I am making payments on it.  Taxes and Insurance have gone up so high and still climbing.   I bought my current home 10 years ago, paid it off in 4 years and I am 70.  My home is a safety net for me, should I live a little longer.  I have made payments on 3 homes in my life and I have rented before I owned.  Prefer to own.
Apr 6, 2013 9:32AM
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I paid my middle-class house off last year at the age of 43, so I won't have to pay rent or mortgage for the rest of my life.  There's no way that I would be better off renting.  I did it on a very middle-class income, so it can be done by a lot of people if they play their cards right.

Buy a reasonable house (not a dream house) that you can afford, put a lot down, and pay extra on the mortgage every month.  The extra mortgage money, by the way, comes from driving a cheap-a$$ car (my car is worth about $2K).

You've got to prioritize where your money goes.  Housing is more important than a new car.  Pay the house off before you do any renovations unless they are absolutely necessary.  Learn to cook for yourself, it will also save you money.  After all, what is more important than a place to live??
Apr 6, 2013 8:44AM
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The wife should lay all kinds of tools on the kitchen table and ask the husband to bring her a crescent wrench. If he can't then rent.

My wife and I bought a place 12 years ago. !00% down with $0 mortgage payments. I do all our repairs at cost. Beat that, renters.
Apr 6, 2013 8:28AM
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My fiancee and I just bought a condo in Northern NJ, literally on the Hudson River in a high rise. We put down 20% and our interest rate is 3.625%. After our mortgage payment, real estate taxes, maintenance fees, utilities and cable bill we wind up paying about $100 a month less than most of our friends do just in rent. Of course it is hard ot come up with 20% for a down payment, but I'd been saving since I got my first job and she also had saved up quite a bit before we had met. If you have the money to buy, then buy. 
Apr 6, 2013 7:57AM
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Just wait until the Gov't takes away interest rate deduction (it's coming) and local municipalities start increasing RE taxes to desperately generate revenue for their failing budgets.
Apr 6, 2013 7:15AM
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You clowns know nothing about real estate.
Apr 6, 2013 7:12AM
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American are idiots when it comes to purchasing a home.  A home is not an investment.  It is property on which one grows their family, multi-generations from birth to death.  We, American's have been marketed too, buy starter homes, or move every seven year.  This will never make you financially secure, why continue to pay more or new fee, mortgage financial charges, and renovations on new properties (if the last owner stay only seven years, how well has the property been kept?).  Why do we move further from our workplaces than our current homes, (school districts, square footage, etc... should have thought about it before purchasing, or been a better citizen and helped build a better community).  The total percentage of american household income has increased every year since the 1960's.  If we can't make a mortgage payment with 30% of your monthly take home pay you can afford to buy.  (rented 18 years, $120,000 spent)
Apr 6, 2013 6:31AM
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My house isn't appreciating at all, but I still love it.  I rent out rooms and that pays the mortgage.  I can also deduct taxes and interest at tax time.  I am updating the house and plan to sell it in about five years when, hopefully, the value will have risen.  In the meantime, I really enjoy having my own home.
Apr 6, 2013 5:14AM
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The myth that began in the 1930s about the "pride in home ownership"  and the great "American Dream" has misled many people. It's fine for those who have the income and savings to cover all the little things that pop up. Besides general maintenance and keeping the house updated, taxes and insurance can also take a bite out of your budget.

 

 If you have a mediocre paycheck and little savings, you're better off in an apartment. Ask the hundreds of thousands of people who stuck their necks out and mortgaged a house during the housing boom. It takes many years to pay a house off and often people refinance and the house is truly never theirs no matter how they want to phrase it. It belongs to banks and mortgage companies and you're still basically renting.

 

"Home is where the heart is" is still something to consider. It's where your family and pets live and happy moments are shared. It truly has nothing to do with the mansion, showmanship lifestyle that is so prevalent today.

Apr 6, 2013 3:55AM
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Heck, let's just see if we can convince people that renting is better than buying.  No sense building equity of your own when you can pour money into someone else's pocket and make them richer while you get poorer and end up with nothing to show for all the money you spent on housing.  We are becoming a nation of renters anyway, and home ownership is at an all-time low.  So much for the American dream.
Apr 6, 2013 3:39AM
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So this article told me nothing at all . It comes down to your personal choice , and area you want to live .
Apr 6, 2013 2:27AM
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Sure, buying is cheaper in all those cities......cities where nobody wants to live......lol
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