I was reading the latest news blurbs this morning and came across this article about Renting Vs Owning. I felt it might be useful for everyone who is still debating whether it is time to buy. Let us know your thoughts.
One year ago, Trulia’s Rent vs. Buy Report, released by online real estate aggregator Trulia, found it was 44% cheaper to buy a house than to rent. Today, the gap has narrowed, due in part to rising interest rates and home prices. The newest edition of the report finds that buying a home is now 38% cheaper than renting. The report compares costs for a seven-year period using five calculations:
1. The average rent and sale prices for an identical set of properties;
2. The initial total monthly costs of owning (assuming 20% down and a 30-year fixed-rate mortgage at 3.5% interest, as well as annual maintenance, insurance, utility, and property tax expenses) and renting (monthly rent plus renter’s insurance);
3. The future total monthly costs of owning and renting;
4. One-time costs and proceeds (for owning, this includes closing costs and capital gains tax of 15% for gains above the $500,000 annual exclusion; for renting, this includes one month’s security deposit); and
5. The net present value to account for opportunity cost of money (this compares cash flows over time).