Buying vs. renting a home
April 22, 2014
It's an age-old question for many young adults and fledging families: Should I buy or rent a home?
There's multiple items to consider—including home insurance rates and a mortgage down payment—but the right answer will vary from person to person. It will also vary by region, according to a recent study from RealtyTrac.
Buying vs. Renting is a tough decision for many families.
RealtyTrac reported that buying or renting a home could be more or less advantageous depending on the city you live in. For example, RealtyTrac reported Baltimore was the most favorable city in the country for homebuyers. While rent in Baltimore averages $1,599 per month, the average monthly mortgage payment for a home in the city is just $439 on a median sales price of $85,000.
Like Baltimore, if you happen to live in or near Washington County, Miss., it's definitely a good idea to consider making a purchase. RealtyTrac reported the average mortgage in Washington County was a mere $217 a month for a home with a median sales price of $42,000.
On the flip side, the most expensive city to purchase a home was San Francisco. There, the average home mortgage came in at $4,599 on a median home value of $890,500, according to RealtyTrac.
It might be a better option to rent than buy in New York City. The average rent in the Big Apple is $1,852 per month, while the average mortgage costs $4,581 a month, for a net difference of $2,729.
Is buying better on average?
The Explorer reported that buying is still a better bargain for Americans than renting in most places across the country.
Citing data from Trulia, The Explorer reported that buying is 38 percent cheaper than renting on a national scale, although last year, the numbers showed homeownership was 44 percent cheaper than renting.
In Phoenix and Tucson, Ariz., Trulia's Rent vs. Buy analysis revealed it is 33 percent cheaper to buy than rent in metro Phoenix, and 42 percent less expensive in Tucson. Those figures were 46 percent and 48 percent cheaper, respectively, last year.
“Rising rents hurt affordability relative to incomes, but rising rents make buying look cheaper in comparison,” said Jed Kolko, Trulia's chief economist.
The tipping point
A major question for economists is when renting will become cheaper than buying. According to Kolko, homeownership will be less expensive than renting until mortgage rates hit 10.6 percent in all but the most extreme markets. Rates haven't gone that high since 1989, per The Explorer.