Buying a Home vs. Renting a Home
The real estate website Trulia recently released its 2012 Rent vs. Buy Report, which analyzed the average cost of renting versus buying for all homes on the market in America’s 100 largest metropolitan areas.
The report also factored in all cost components, including transaction costs, taxes and opportunity costs and assumes a 3.5 percent mortgage. It also includes itemized deductions at the 25 percent federal tax bracket and a seven-year time horizon.
What the report shows is that homeownership is cheaper than renting in all of the 100 largest U.S. metros by a substantial margin, while also noting that relative affordability varies by location. For example, the largest savings can be found in Detroit, where it is 70 percent cheaper to buy a home than renting one. On the other end of the spectrum is Honolulu where it is only 24 percent cheaper to buy a home than rent.
The increasing cost of renting has made buying a home more attractive. With interest rates at historic lows and home prices more affordable than in years past, homeownership makes more sense on a month-to-month basis, and also gives homeowners an opportunity to gain equity in their home.