As a Realtor, the answer to this question should be obvious, but it is not. In theory, especially with the basement prices and record low interest rates, home buying is cheaper than renting. According to a March 2012 report by Deutsche Bank, it is cheaper to buy than rent, on a national level; even after taking into account the property taxes and down payment. However, experts are saying that there are some parts of the country where renting is cheaper than buying. The report identified 13 cities where renting is cheaper than buying. Here are five of those 13 places where renting beats buying:
1. Northern New Jersey - Homeowners pay an average of $530 more in mortgage payments when compared to rent. To purchase a home, a median-income earner would need to have a 24% raise over last year to purchase a home.
2. Long Island, NY - Asking prices for homes are about 24% higher than the median income and Nassau County's property taxes are the second highest in the nation. Renting could save about $550 a month over a mortgage.
3. California - As a former Californian, this really hits home. Homeowners could pay anywhere from $900 to $1260 more a month in mortgage payments over rents.
4. Seattle - Renters will pay an average of $380 less per month than a homeowner.
5. Honolulu - According to NAR, the median household income is only 39% of what a homeowner would need to buy a median priced home. With 10% down and a 30-year note, homeowners could pay up to $700 more a month in mortgage payments over the rent payment.
So what does this all mean? If you live, or want to live, in one of these areas, should you rent over buying? Well, maybe. Maybe not. First it means do your homework. A buyer needs to understand his financial situation and goals before purchasing a home. In most cases, it is a better financial strategy to buy a home over renting. You should always consult with a financial planner to make sure you are on the right track. Consult with a loan officer to find out what you can afford and to get an idea as to what your mortgage payments are going to be. Last, but certainly not least, contact a local realtor. Your local Realtor is an expert in the real estate market. He will be able to give you an accurate report on market conditions as well as locate a home that will fit your needs. Once you have all of the pieces of information, you will be empowered to choose the best option that will get you closer to your goals.
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