Trulia: Buying costs 45% less than renting
If buying is such a great deal, why aren't more people doing it? Difficulty saving for a down payment, poor credit and job instability lead the list of reasons outlined in a new report.
If you have good credit, itemize deductions on your tax return and plan to stay in your home at least seven years, buying is cheaper than renting in all 100 of the largest U.S. metro areas, including New York and San Francisco.
Nationwide, buying is 45% cheaper than renting, with the spread ranging from 70% in Detroit to 24% in Honolulu, according to Trulia's "Summer 2012 Rent vs. Buy Report."
"Despite the recent price rebound, rents continue to rise faster than prices, and mortgage rates are near record lows," Jed Kolko, Trulia's chief economist, said in a news release. "Homeownership makes the most financial sense for people whose strong credit scores let them snag the lowest mortgage rate and who get the biggest benefit from deducting mortgage interest and property taxes from their income taxes."
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The Trulia analysis attempts to account for all the costs of homeownership, including closing costs, maintenance and property taxes. Cost of rentals includes a security deposit and renters insurance. The researchers looked at homes for sale and for rent from this past June to August.
In these cities, buying held the greatest edge over renting a comparable home:
- Detroit: $1,149 a month to rent versus $349 to buy.
- Gary, Ind.: $1,649 to rent versus $616 to buy.
- Oklahoma City: $1,576 to rent versus $590 to buy.
- Lakeland-Winter Haven, Fla.: $1,276 to rent versus $495 to buy.
- Toledo, Ohio: $1,222 to rent versus $476 to buy.
These are the cities where the cost of renting was the closest to the cost of buying:
- Honolulu: $2,007 to rent versus $1,519 to buy.
- San Francisco: $3,226 to rent versus $2,327 to buy.
- New York City: $2,687 to rent versus $1,857 to buy.
- San Jose, Calif.: $2,646 to rent versus $1,819 to buy.
- Los Angeles: $2,020 to rent versus $1,379 to buy.
You can see the numbers for all 100 cities here.
Of course, to do these kinds of analyses, economists have to make certain assumptions. These calculations looked at renting similar homes, but renters often choose smaller spaces. Some of the metro areas have a wide variation in rents. While the cost of buying may be less than the cost of renting in the New York metropolitan area, buying may not be cheaper in prime neighborhoods in Manhattan.
Plus, if you don't have good credit, don't itemize deductions and don't plan to stay in a home at least seven years, your calculations would be different.
If buying is a better deal in so many areas, why aren't more people buying?
A new survey by Rent.com showed that 47% are still saving for a down payment, 22% are waiting for their credit scores to improve, 20% are waiting for better job security and 11% are waiting for the market to stabilize.
Trulia's Kolko writes:
Bottom line: Buying may beat renting in every major metro by a wide margin, saving consumers thousands of dollars a year, but buying still remains out of reach for many would-be homeowners.
I live in a small town in Western Kentucky. When we built our home in 1981, at a cost of $48,500. We were estatic, when we secured a 10% fixed loan, when the current interest rates were close to 18%. After 18 years, we ended up paying $104,000.00 for that $48,500 house. Since moving in, we have replaced windows,doors, air conditioners, furnaces, water heaters, flooring, siding, roofs, ceilings, bathrooms, tubs and countless other things, that wear out over time, from normal daily use. Throw in the sewer problems, water leaks, taxes, insurances............
I estimate that $48,500 house, has cost us well over $250,000. Because of the community we live, the house appraises at $85,000. What an investment!!!
And how about the time, our water heater busted the day before we had planned to go on a long awaited vacation., but had to cancel, as we had to clean up the mess and wait on plumbers, (and give them my vacation money!)
If I was a renter, I could have called my landlord and said "YOU, have a water leak and I'm going on vacation, hope you have it fixed, when I get back!"
Sure, but believe this: NO ONE is safe in their job or paycheck in this economy. If you lose your job, there may not be as much opportunities in your present city and you may be forced to leave the city or starve! What will you do? You home is still there and mortgages need to be paid. People may not buy your property as quickly as you may want to sell is. If you move to another city, you will be forced to pay the mortgage AND your new rent/mortgage in the new city. Yes, you can mitigate by getting a renter in your old property, but have the headaches of being a remote landlord hundreds of miles away.
So is it worth it? Is it not better to rent a smaller unit or home (yes, you can rent a home) rather than assuming your paycheck will always be there for you to pay the mortgage? There are other ways to build equity rather than owning a home. That idea is old… I REFUSE to own a property and risk being stuck in the place I am in, risking the prospect og no jobs in city I am in, unable to move and leading a frustrating existence. You make your own choice. Don’t believe every article you read on the internet is all I ask.
Renting is cheaper hands down what this left wing/Nobama supporter fails to tell the TRUTH about, is not so much the buying of the house, but the OTHER expenses that sink you in it:
Maintenance on a home: You pay for
Maintenance on a rental: FREE (most of the time)
Mortgages: Increase yearly (upwards of 200.00 per year due to property tax increases)
Rentals: Usually maximum of 50.00 yearly increase (most of the time it's less)
Heating and Cooling a home is usually much more expensive than a rental, and some rentals even include utilities.
If appliances break in a home, YOU are responsible for their repair, if you are in a rental, your landlord is.
Granted, you do not gain value in a rental, but when you consider that houses are NO LONGER the retirement nest egg they used to be, it dosen't matter anyway.
GO ROMNEY 2012!!!
Buying can be cheaper than renting here in Houston TX.
A few weeks ago there was a news article about how the rental rates were rising up to 11.2% in the Houston TX metro area.
There was one couple mentioned in the article that had sold their local home here and decided to rent for awhile before purchasing another home. They leased a nice 2 bed, 2 bath apartment with amenities for $1,115.00 in the suburbs of Houston. After being there for one year they were informed that the rent was going up an additional $350.00 per month. So instead of paying $1,465.00 for the same apartment, they decided to move into a 1 bed, 1 bath apartment in the same complex for $945.00 per month.
I just refinanced my 5 yr old home at 4.00% interest, my new payment with taxes & insurance included is $999.73 per month in the suburbs of Houston. My home has 2325 sq" with 4 bedrooms, 2 1/2 baths, family & game room and a 2 car garage on a large oversized lot.
I also understand that buying verses renting is a personal choice and that an individuals choice can be related to numerous factors such as an individuals prefences for mobility, stability, finances, etc.
If you decide to purchase a home, don't buy a home as a long term investment. Look at the purchase of the home as a comfortable shelter, where you create lasting memories, where you can have the freedom to paint the walls, decorate, entertain, have overnight guest over and have pets without having to ask permission from management for approval.
Maybe next year.
We have been saying that for 5 years now.
About Teresa Mears
Teresa Mears is a veteran journalist who has been interested in houses since her father took her to tax auctions to carry the cash at age 10. A former editor of The Miami Herald's Home & Design section, she lives in South Florida where, in addition to writing about real estate, she publishes Miami on the Cheap to help her neighbors adjust to the loss of 60% of their property value.