Cheaper to Buy Than to Rent

A new study by Trulia reveals that in the nation’s 100 biggest metropolitan areas, it is now cheaper to buy a home than rent. The average cost of homeownership — including mortgage, insurance, taxes, and maintenance — is 38 percent less than what it costs to rent, up from 35 percent last year. Low 30-year fixed mortgage rates and strong demand for rentals have conspired to improve buying conditions. According to Trulia chief economist Jed Kolko, “Young adults are moving out of their parents’ homes now. For many people, the down payment is still a barrier to buying a home. And for people who lost a home in foreclosure, it might still be a while before they can buy.” The advantages of buying are smaller on the East and West Coasts; and the cost advantage of homeownership falls to 25 percent nationally when buyers obtain FHA loans, though even then buying is less expensive than renting in nearly all locales if buyers plan to stay put for seven years or more and take advantage of the mortgage interest tax deduction. Meanwhile, a separate study by the Financial Industry Regulatory Authority indicates that 74 percent of renters — compared to 41 percent of homeowners — have household incomes under $50,000, making it difficult to cover all their expenses. The study shows that many renters remain stuck in place, with 58 percent noting that they would have a tough time coming up with $2,000 within a month to pay an unexpected bill, let alone finding the money for a down payment. | Read More