22
Aug
11

Cheaper To Rent Or Buy?

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.

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, including New York, Seattle and San Francisco, renting was cheaper. In the remaining 14% of cities, renting was less expensive but close to the cost of buying.

In addition to a continuing decline in home prices, rock-bottom interest rates have added a lot of weight to the buy side of the scale. The overnight average rate for a 30-year fixed was just 4.19% on Monday, according to Bankrate.com. A 15-year fixed averaged just 3.43%.

Add in the tax perks of home ownership and for those who can afford it (and who can actually qualify for a loan), it certainly is a buyer’s market.

“It’s a personal decision, of course. But if you have a steady job and you are planning to stay for seven years or more and have enough cash to put 20% down and enough left over for seven or eight months of expenses, you’re better off buying in most places,” said Daisy Kong, a spokeswoman for Trulia.

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. Banks offer a variety of loan programs with varying down payment requirements. Call me for referrals to top lenders and mortgage brokers in our area ton find out what your particular requirements will be.
  • 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.

For guidance and direction for your self or someone in your family, give me a call and I will take personal responsibility for making sure you get all of the information you will need to make an informed decision for you and your family.

Bye for now,

Dean Souza

510-888-3322

reo@deansouza.com / dsouza@deansouza.com

Focused on the Success of Your Move

 

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Dean Souza

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