Despite What You've Heard, Buying is Still More Affordable Than Renting
on Tuesday, May 28th, 2013 at 10:39am.
In years past, the common conception has been that renting property is a much more effective money saver as compared to buying, and that homes are an investment that will only lose you money as time goes by. New information, however, is showing that to be less and less true.
According to Forbes, just last year renting was 46% more expensive than buying. And even though the rising cost of homes has narrowed the gap slightly, it is still 44% more expensive to rent today – thanks in part to the steady decline of mortgage prices and the opposite growth of rent costs.
Buying isn’t as simple as it sounds, however. The biggest problem resides in the fact that nearly everyone who buys a property started out paying rent somewhere. Because of these rising rent costs, renters are finding it more and more difficult to save up for a down payment on a house, and are becoming trapped in a cycle of rising monthly rent payments.
But there are geographic characteristics – buying isn’t cheaper than renting universally. As most people know, renting in Manhattan (expensive as that famously is) is still more affordable than attempting to buy a property. Drive out of the city and into the suburbs, however, and buying becomes the more frugal option. It’s all about the location.
Forbes also has an interactive graphic available that can, when you input personal factors such as your monthly rent, price of a new home, percentage of your down payment and mortgage rate, and annual property taxes, put together a graph that will show whether it is more affordable to rent or to buy.
This isn’t just an American occurrence, either. According to telegraph.co.uk, buying in 2012 turned out to be 16%, or 120 pounds, cheaper than renting.
Yet people are still renting – it’s a product of our still-fragile economy. People can’t always afford something that is long-term affordable. They have to put their money toward something that can give them return immediately. And until this problem is resolved, expect the number of renters around the world to increase, despite seeing the average cost of a new home go down.