Is homeownership a smart investment again | Pound Ridge Real Estate

 

One year ago, Trulia’s Rent vs. Buy Report, released by online real estate aggregator Trulia, found it was 44% cheaper to buy a house than to rent. Today, the gap has narrowed, due in part to rising interest rates and home prices. The newest edition of the report finds that buying a home is now 38% cheaper than renting. The report compares costs for a seven-year period using five calculations:

 

1. The average rent and sale prices for an identical set of properties;

2. The initial total monthly costs of owning (assuming 20% down and a 30-year fixed-rate mortgage at 3.5% interest, as well as annual maintenance, insurance, utility, and property tax expenses) and renting (monthly rent plus renter’s insurance);

3. The future total monthly costs of owning and renting;

4. One-time costs and proceeds (for owning, this includes closing costs and capital gains tax of 15% for gains above the $500,000 annual exclusion; for renting, this includes one month’s security deposit); and

5. The net present value to account for opportunity cost of money (this compares cash flows over time).

According to the report, homeownership remains cheaper across the nation and in all of the 100 largest metro markets. However, these findings speak broadly to the national market, and there are several situations where it still makes more sense to rent. Here, we look at some of the reasons why it’s a good time to buy for many Americans, and circumstances when it might make more sense to rent.
Reasons to Buy
Peggy Jennings, a Broker/Realtor with Prudential Great Smokys Realty in Sylva, North Carolina, cites favorable interest rates, good inventory and relaxed loan requirements as good reasons to buy now. “Interest rates are still good. The inventory is improving as more people are deciding it’s time to sell. There’s going to be a lot of good inventory coming up, especially since the foreclosures from a couple years ago are now rehabbed and ready to sell,” says Jennings.

 

http://homes.yahoo.com/news/is-homeownership-a-smart-investment-again–215619685.html

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