Buying means cheaper – The results of the latest 12 Key Differences show that home ownership remains cheaper than renting with a traditional 30-year fixed rate mortgage in the 100 largest metro areas in the United States. Stats actually show that the range is an average of 3.5% less expensive in San Jose (CA), all the way up to 50.1% less expensive in Baton Rouge (LA), and 33.1% average nationwide!
Other interesting findings in the report include:
Interest rates have remained low and, even though home prices have appreciated around the country, they haven’t greatly outpaced rental appreciation.
With rents & home values moving in tandem, shifts in the ‘rent vs. buy’ decision are largely driven by changes in mortgage interest rates.
Nationally, rates would have to reach 9.1%, a 128% increase over today’s average of 4.0%, for renting to be cheaper than buying. Rates haven’t been that high since January of 1995, according to Freddie Mac.
Ever-rising prices for homes combined with flat or lower rents are changing the rent vs. buy equation in America’s biggest housing markets.
While it’s still a better deal to buy, the economic benefit has narrowed to the point that in some places, for some households, the decision to rent or buy a home may be too close to call.
To calculate the financial cost of renting versus buying assume that households stay in their home for seven years and can afford to put 20% down and a 30-year fixed rate mortgage when buying a home.
Under those conditions, it is still cheaper to buy than rent in all of the 100 biggest U.S. metro areas.
Bottom Line
Buying means cheaper, it makes sense socially and financially. If you are one of the many renters out there who would like to evaluate your ability to buy this year, let’s get together to find your dream home.
Are home prices approaching bubble territory – As home values continue to rise, some are questioning whether we are approaching another housing bubble. Zillow just reported that: “National home values have surpassed the peak hit during the housing bubble and are at their highest value in more than a decade.” Though that statement is correct, […]
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