Are you weighing the pros and cons of homeownership? Purchasing your home is typically the largest financial decision you’ll ever make.
From the down payment to the often 30-year financial commitment, it can be a scary step. However, for those who are able to make it – buying still remains cheaper than renting.
How much cheaper? According to Trulia’s chief economist Jed Kolko, it’s 38% cheaper. Every six months Kolko runs the numbers to produce a Rent Vs. Buy Report.
The rent versus buy math is different in each local market. Buying ranges from being just 5% cheaper than renting in Honolulu to being 66% cheaper than renting in Detroit. But even for a specific market, the cost of buying versus renting depends on how much home prices rise (or fall) after you buy. Our model assumes conservative home price appreciation, but – as we all know after the last decade – home prices can unexpectedly rocket or plummet.
Where does Seattle fit in? Great question! Kolko estimates that buying in Seattle is 34% cheaper than renting. However, he also points out that the average rent prices in the Seattle are have risen sharply. While rising rent prices can make it more difficult for borrowers to afford a home purchase, they also continue to make buying cheaper in comparison.
Curious about the buy verses rent percentages in other markets? Trulia’s offers an interactive map that lets you easily compare them.
The question really is: Will renting soon become cheaper than buying?
Perhaps in some markets. Kolko’s study identifies a “tipping point” at which renting becomes cheaper than buying. Honolulu is right on the cusp. Here in Seattle the percentage may drop some, but we’re nowhere near this “tipping point.”
Is home ownership right for you? Are you curious about your options? Contact Rob today!