Home prices have taken such a beating and demand for rental units has increased so much that it's now cheaper to buy a two-bedroom home than to rent one in most major U.S. cities.
Right now, in Central Florida, the average monthly rental on a modest 3 bed/2 bath home is around $1,000.00 while the average mortgage payment including taxes an interest would be around $765.00 per month.
According to real estate web site Trulia, buying was cheaper than renting in 74% of the country's 50 largest cities in July. In just 12% of the cities, renting was cheaper. In the remaining 14% of cities, renting was less expensive but close to the cost of buying.
Add in the tax perks of home ownership and for those who can afford it, it certainly is a buyer's market.
Should you rent or buy?
The buy-rent calculation is just one part of the decision-making process. Other factors include:
- How long you plan to stay - If you're not keeping the home for several years, transactional costs of buying and selling (e.g; commissions, closing costs) can wipe out any buying edge.
- Whether you have cash for closing - It's not easy to find banks willing to lend more than 80% of the cost of a home. That means buyers have to come up with 20% down, plus closing costs. On a $200,000 home, that's $40,000.
- Whether you can cover all the homeownership costs - It's not just the mortgage: There are property taxes, insurance, heat, utilities and regular maintenance.
- Whether you can claim the tax advantages of homeownership - Mortgage interest is deductible and can shave a lot off tax bills but this benefit accrues mostly to high income earners with substantial mortgage payments. Many borrowers claim the standard deduction on their taxes and so derive no savings from the deduction.
Even where it's cheaper to rent, it doesn't necessarily mean renters will come out ahead. Depending on where they live, renters may save on monthly expenses but, unlike the forced savings of mortgage payments, they won't have anything to show for their monthly payments in the way of savings.
Ultimately, however, the decision whether to buy or rent depends on each person's situation and their plans for the future.
Contact me about the rent vs. buy calculations for your particular situation. I'll help you determine which is right for you.
Realty International LLC