Buying a home is on average 38% cheaper than renting in America’s 100 largest metropolitan areas, according to a recent study by Trulia.
The savings accrued when buying as opposed to renting varied upon location. But homeownership remains cheaper than renting in all of the 100 largest U.S. metros. The lower saving rates were in California and New York and the highest were in the Midwest and South. The savings varied from 5% in Honolulu to 66% in Detroit.
Those areas with a higher savings rate include Gary, IN (61%), Birmingham, AL (58%), Kansas City, MO (58%) and Memphis, TN (56%). Those areas with a lower savings rate include San Jose, CA (9%), San Francisco (13%), New York (22%) and Austin, TX (23%).
The report’s calculation assumes a 4.5% 30-year fixed-rate mortgage, 20% down, itemized tax deductions at the 25% bracket, a conservative annual home price appreciation ranging between 1.7% and 3.1% (depending on the metropolitan area), and the buyer staying in the home for seven years.
Trulia provides an interactive map that reveals how the savings change under alternative scenarios. These scenarios include if a homeowner does not itemize (many homeowners do not), if interest rates change, or how long the buyer lives in the home.
The report factors in many considerations, such as maintenance, insurance, taxes and the fact that the average home for sale is approximately 50% bigger than the average rental unit.
Trulia lets potential buyers personalize their data. TheirRent vs. Buy Calculator lets buyers compare the cost of renting and buying based on location, individual assumptions and scenarios.
If you would like more information about the cost of buying versus the cost of renting, please contact me today @ www.myprospectmortgage.com/lwong