Are you renting an apartment or house? How much does it cost you? How much does it cost you to live in a comparable house that you can buy?
Many people just assume that it costs a lot more
to own
than to rent. For the past few years, that
has indeed been the case for most markets.
But with the home prices plunging for two whole years and
mortgage rates
at historical lows, that "normal" relationship no longer holds. In fact, for
most parts of
At the peak of the recent home price run-up
(November
2006), the median home sale price for
Just 3.25 years later (February 2010), the median home sale price was 61% lower at $150,000 and the "real net monthly cost" of homeownership was down to $779; or 62% lower than what it was just 2.5 years ago! (The lower mortgage rates today also help: for every one percentage point decline in mortgage rates, it is similar in impact as a 10% decline in home price.) The average apartment rental rate was around $1,126 (first quarter 2009 data). It is actually cheaper to own a house than to rent nowadays!
For those homeowners that put in less than 20% down, they will have higher monthly payments and private mortgage insurance (PMI) costs. But even with the higher costs, the amount of equity build up each month far exceeds the higher payments. That equity belongs to the homeowner, not the apartment owner.
Still not convinced? See the numbers for yourself:
Here are some
data on income, weather (wind intensity), and
schools.
Here are some
tools for mortgage analysis.
If you are thinking about buying a house now,
check out some
tips from a recent buyer.
[1] This is what we call the "real net monthly cost" -- mortgage payments + taxes + homeowner's insurance - income tax deductions. For the purpose of this analysis, we assume 20% downpayment and therefore no private mortgage insurance required.