Is buying nearly as affordable as renting? Don’t believe the hype
22nd July, 2009 - Posted by admin - 3 Comments
I first started covering residential real estate during the housing boom years. At that time, every real estate agent I interviewed would always run down a list of reasons why owning a house made more financial sense than did renting. Inevitably, they'd say that with low mortgage interest rates, the monthly payment for a house wasn't much higher than a typical monthly rent check.
It was difficult not to laugh at this. As anyone who's owned a house will tell you, it's far more expensive to own a home than it is to rent an apartment, nine times out of 10. Why? Because something always goes wrong with a home. You'll be comfortable with your monthly bills only to find that the water heater is leaking. Maybe your roof needs to be replaced. Maybe your basement starts leaking. It doesn't matter; there's always something to eat up your money.
When you rent you are at the mercy of your landlord, who can raise your rent when it's time to sign a new lease. But you can also call that landlord when your heat goes out or your refrigerator goes on the blink. The landlord will then have the pleasure of shelling out the big bucks for replacements.
I bring all this up because of a new Associated Press story that says that the gap between the monthly mortgage payment on a median-priced home and the median rent has dropped from $777 a month to just $221 a month in the last three years. This, the AP argues, should inspire more renters to seek the stability of a home.
I don't want to blast homeownership. I'm glad my wife and I are able to raise our two sons in a nice house. But I wouldn't be too upset to leave all the costs of owning a home behind. I look back at my renting days as being rather carefree ones. When something went wrong I picked up the phone and called my landlord, not the area plumber.
So, yes, it is cheaper to own a house now. But don't be fooled into a direct comparison between your monthly rent and what your monthly mortgage payment would be. Don't forget to factor in the unexpected and always unpleasant extra monthly costs of owning a home.
Posted on: July 22, 2009
Filed under: mortgage tips
3 Comments
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January 2nd, 2011 at 5:24 pm
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