When does renting make more sense than buying?
We consider that question in a story today, stacking up average home-buying and -owning costs against average rental costs and assuming five years of no change in home prices:
According to The Sun's calculations, it could take more than nine years to come out ahead of renting if you buy the average-priced house in the metro area. And that's with all those fat tax deductions for mortgage interest.If you want to sell and still come out ahead, tack on another 18 months or so for Realtors' fees and closing costs that can easily run $20,000 on the average house. And it's an extra year on top of that if you consider that, as a renter, you could probably earn at least 4 percent a year in interest on the money you didn't need to use for settlement and a down payment.
Remember, a change in the housing market -- for better or worse -- will change the results. As one economist points out, nine-plus years is such a long time to come out ahead that something will have to give.
First thing tomorrow I'll put up all the details you'd need to do your own calculations. Average is all well and good, but nothing beats specific.
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Comments
I'll do you one better. Visit the link below (NOTE: you'll have to register with the nytimes website), then punch in all the numbers. Given what your (hypothetical?) mortgage would be, your rent, and other factors, it would tell you that you'd come out ahead after __ years/months, whatever.
Enjoy!
http://www.nytimes.com/2007/04/10/business/2007_BUYRENT_GRAPHIC.html?_r=2&oref=slogin
Posted by: Ron | December 23, 2007 8:50 AM
Oh, I'll be pointing everyone to online calculators -- no sense in doing all that work by hand. But I'll lay out all the average costs and explain how to get a calculator to accommodate an "X years flat, followed by Y percent annual appreciation" timeline.
Posted by: Jamie Smith Hopkins | December 23, 2007 2:31 PM