Study: Buying a home is 44 percent cheaper than renting

Denver Post....

 

A new study by Trulia shows that buying a home is 44 percent cheaper than renting, despite rising home prices.

Trulia's Rent vs. Buy report surveyed the 100 largest metro areas in the United States and concluded that homeownership is cheaper than renting in all of them.

The 44 percent figure — which compares with 46 percent a year ago — assumes that the buyer stays in the home seven years, itemizes deductions at the 25 percent tax bracket, has a 3.5 percent interest rate on a 30-year fixed-rate mortgage, and puts 20 percent down.

Low mortgage rates have kept the overall cost of buying down, even though prices are up 7 percent year-over-year.

Jed Kolko — chief economist for Trulia, an online residential real estate site — said the biggest discount is in Detroit, where buying is 70 percent cheaper than renting, and smallest in San Francisco, where buying is 19 percent cheaper than renting.

Kolko said buying won't look this good next year because prices are rising faster than rents and mortgage rates are likely to rise.

For those who stay less than seven years, do not itemize and don't get the lowest mortgage rate, renting can become the better deal. With a 5.5 percent mortgage, for instance, buying is 2 percent more expensive than renting in San Francisco — even if you stay for seven years.