Buying vs. Renting
The cost of renting has been unusually high this year and shows no sign of slowing down. With an annual increase of 3.9%, it may be said with confidence that these rent increases are a direct result of the foreclosure epidemic. With a low inventory of rentals, and a surge in renters, landlords are in the position to name their monthly price and pick and choose whom they rent to. This is troubling when taking into consideration that current incomes are not keeping pace with these rapid increases.
So, the big question is, is it more cost efficient to rent or buy?
According to both Forbes and Freddie Mac, buying is much more affordable than renting – an astonishing 44% more affordable! Even in the larger cities like San Francisco, homeowners can see a 19% overall annual savings. Despite the fluctuation in home prices, up 7% in the past year, it seems that this will be a continuing trend. A traditional 30 year fixed rate on a home purchase would need to reach 10.5% for the two options to even become comparable. We have not seen rates like this since the 1980s.
Annual savings aside, homeownership comes with other advantages as well:
Security and Freedom – owning your own home means you are the only one with the keys and the freedom to make any decisions pertaining to the home.
Investment– Unlike renting, where your money shows no return, your monthly payments ultimately result in a gain in overall ownership.
Tax Advantages: Depending on the situation, some of your property taxes and interest may be deducted from your income tax. *Always consult with a tax professional first.
Stability – as a renter, you always run the risk of rent and/or lease going up. With fixed rate mortgages, your payment is set for a specific duration of time.
Considering that the ownership rate in the US is nearly 69%, it is still the “American Dream” to own a home. But let’s face it; a security deposit is a lot less than a down payment! Although it may be ideal to have 20% to throw in as a down payment, there are loan programs that will lend with only a 5% down payment. Other programs offer loans up to 102% of the purchase price. Please contact us for more information on these unique programs.
For an interactive calculator on buying vs. renting, click here