It’s a fact that many folks in our neighborhood decide not to buy a home. Aiming to save some cash, they rent instead. They may feel that it makes more sense to work on rebuilding their portfolios, put some extra cash into a rainy day fund, save for retirement, or for college -- for any number of worthy goals.
These would all be prudent financial maneuvers, but only if the original assumption is correct. But today’s environment is creating a new reality. It’s one where renting may not be as much of a cost saver as most people think.
Since it is my profession to deal in real estate, you might think my answer to the question of whether to rent or to buy a home would be an automatic ‘buy!’ Not so. While I certainly do want to help arrange a sale whenever a local buyer and seller can agree on terms, I also want all my clients to make the financial decision that is right for them and their family. And as we enter the April selling season in our town, I’m pleased to be able to report on a piece of information that may be surprising. It’s one that comes from the latest Trulia Spring 2012 Rent versus Buy index.
This index is a widely watched calculation derived from data in the 100 major metro markets. A Price-to-Rent ratio of 15 or less means that any buyer who plans on living in his home for at least five years would be better off to buy a home than to rent it.
Bottom line: 98% of those 100 areas currently offer a cheaper environment in which to buy a home than to rent it! To make sense of the numbers, Trulia.com looked at the asking price of national rentals and homes for sale. It also included insurance, taxes and maintenance costs in the calculation. With low interest rates making the monthly mortgage cost lower, and high rental rates bringing the rental rate higher, many would-be renters might now find themselves looking at a surprising new reality -- affordable homeownership.
If you are currently considering renting or buying a home in our area, why not sit down with me in our office to run a few numbers first? I am happy to schedule time to discuss your needs before you sign a lease. Today it is entirely possible that for you, owning a home will just be cheaper than you think!