Study: Owning A Home Cheaper Than Renting One
With the economy improving and still historically low mortgage rates, home ownership is regaining its edge over renting in America’s 100 largest metropolitan areas, according to research conducted this summer. . Favorable mortgage rates, tax deductions and time horizon affect the consumer’s decision on whether to buy or rent in these metro areas.
The Summer 2012 Rent vs. Buy Report released by Trulia found with a 3.5 percent mortgage, itemized deductions at the 25 percent federal tax bracket, and a seven-year time horizon, home ownership is cheaper by a wide margin than renting in all of the 100 largest U.S. metros. However, relative affordability depends largely on location.
Despite the recent price rebound, rents continue to rise faster than prices, and mortgage rates are near record lows. Home ownership makes the most financial sense for people whose strong credit scores let them snag the lowest mortgage rate and who get the biggest benefit from deducting mortgage interest and property taxes from their income taxes.
The conventional wisdom is that renting is only cheaper if you plan to move within 3 years. But according to another study, where you live makes a big difference. Check out how long it will take to break-even in these markets:
8.3 years – San Jose
5.9 years – San Francisco
5.1 years – New York City
4.3 years – Boston
4.3 years – Los Angeles
1.7 years – Detroit