Buying Versus Renting Archives - Jagoe Homes

Buying vs Renting continued

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Buying Versus Renting, Easier Choice in the Midwest!

By Jeff Kolko, Chief Economist on October 15, 2014

Buying vs Renting? Buying is 38% cheaper than renting nationwide, and buying is cheaper than renting in all of the 100 largest metros. In fact, buying is at least 20% cheaper than renting under our baseline assumptions in all of the 100 largest U.S. metros except Honolulu.

The gap in the costs between renting and buying differs across metros largely because each market has its own typical prices and rents. In addition, property taxes and home-price appreciation differ locally. Taking all these factors into account, buying ranges from 17% cheaper than renting in Honolulu to 63% cheaper than renting in Detroit.

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Buying vs Renting

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Rent vs BuyBy Jeff Kolko, Chief Economist on October 15, 2014

Buying Cheaper Than Renting

The question of buying vs renting a home answered in detail. Nationally, buying is 38% cheaper than renting with a traditional 20% down, 30-year mortgage. Buying is an even better deal with a 15-year mortgage, but not as favorable with less money down.

Homeownership remains cheaper than renting nationally and in all of the 100 largest metro areas. In fact, buying is 38% cheaper than renting now, compared with 35% cheaper than renting one year ago. Why is the gap widening? Two reasons. First, in the past year, the 30-year fixed-rate mortgage rate has fallen from 4.8% to 4.3%. Second, rents have risen faster than prices, excluding foreclosures. Together, these trends have made buying even more affordable versus renting than it was last year.

Our Rent Versus Buy model assumes a traditional 30-year fixed rate mortgage with a 20% down payment. But there may be good reasons for financing a home purchase other ways. Consumers tell us that the main obstacle to homeownership is the down payment. For those would-be homeowners – especially first-timers without savings or equity from another home – a low-down-payment mortgage might be the only option. For others, paying all cash might give them the deciding advantage over other bidders on a house. This edition of Trulia’s Rent Versus Buy report focuses on how different types of mortgages affect the math of buying versus renting.

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