In Big Metropolitan Areas, Young Workers Are Better Off Buying Than Renting
The debate of whether to buy or rent a place has been a source of frustration for many young people employed in bustling cities. The home prices that have been knocked down and the low interest rates from recent housing crisis has made buying a whole lot better experience than renting in almost every one of the United States markets. With such good deals, buying has become an option for those people who earn enough to afford the homes that are readily available in the market.
A Trulia report released on 13th of October provided some hard consolation for the would-be home buyers who were priced out of hotter housing markets. Across the United States the report mentioned that it is approximately 23% cheaper for a young person to buy a home than to rent one. On the other hand, in places Like San Jose and Honolulu, there is no advantage of buying a house. Furthermore, in cities like New York, the benefit of buying a house will be cut off once the mortgage rates spike up.
Trulia compared the average cost of both renting and buying homes, and discovered that Honolulu and San Jose are the only two exceptions where renting is a much better deal. Trulia’s researchers also factored in the down payments, security deposits, forecasted rent and home appreciation, and the property taxes. For their analysis, they assumed that only 10% of down payment can be made by millennial buyers, and that they may stay in the home for duration of around 5 years.
A Housing Economist, Ralph McLaughlin, mentioned that to find a time when renting was the champion in most cities in the U.S., you will have to look at the records from the 1980s. That was when mortgage rates came in double digits.
In many big cities, the rising rents makes things look bleak for young workers in big cities; however, the negative outlook on rent is going to shift as soon as the interest rates start rising. For now, the data by Trulia clearly shows that in metros (especially the South and the Midwest) the decision of buying a home rather than renting out one makes for better and bigger cost savings.
