Many new home shoppers wonder if renting is better than buying. This is an especially important question today because the challenges facing the mortgage industry over the past few years have pushed many families into apartments. Just a few years ago there was a fairly wide gap between the monthly cost of a new home mortgage and an apartment. But today, as apartment complexes have filled, rents have risen too. In most urban areas the cost of renting has passed the monthly cost of owning a home. Even as home prices rise, low interest rates keep the price cheaper then renting as much as 38% on average.*
Trulia's Chief Economist Jed Kolko wrote, “Now, at a 30-year fixed rate of 4.5%, buying is 38% cheaper than renting nationally” and “Buying beats renting until mortgage rates hit 10.6%.”*
As home prices raise, the money you could be saving by moving into your dream home is decreasing. Now is the best time to stop paying the landlord and start paying into your new home.
Equity is another strong reason to buy instead of rent. Equity is the difference between how much a property is worth and how much is owed on it. You pull the equity out in cash when you sell the home. As long as home prices are going up in your neighborhood you should see a good value in the long run for what you pay into a home. If you're renting a property, the landlord gets the equity when he sells. Owning a home is the best way for most of us to increase our personal wealth.
Buying a home is one the biggest decisions that many of us will make and we all want to choose the option that suits us and our family best. Evaluating the cost of buying a new home versus renting or leasing and taking a careful look at the tax benefits of new home ownership should help us clarify the choice. As rents continue to rise, more and more families are choosing to leave crowded apartment complexes and move into new homes. Today might just be the right day to stop growing your landlord's wealth and start growing your own!
*Trulia 2014 Winter Report