If you’ve been considering making the jump from renter to homeowner, here’s some news that could help make up your mind. According to online real estate company Trulia, buying remains cheaper than renting in most communities across the country as long as mortgage rates stay below 10.5 percent. Even with the recent increase in the 30-year fixed rate to 3.9 percent, it’s still 41 percent cheaper to buy a new home than rent one, nationally.
If you’re in the market for a home in greater Phoenix or Tucson, the numbers in favor of owning are even more impressive. Trulia’s Rent vs. Buy analysis indicates it’s 46 percent cheaper to buy than rent in Phoenix, and 48 percent cheaper in Tucson.
Of course, there are always conditions that go along with such a bold statement. Trulia’s research assumes three main conditions: that you will stay in the home seven years; that you itemize federal tax deductions in the 25 percent bracket; and that your 30-year, fixed-rate mortgage rate is 3.9 percent, with a 20 percent down payment.
The company arrived at its conclusions by calculating the cost of buying and renting for identical sets of properties, including maintenance, insurance, taxes, closing costs, down payment, sales proceeds and monthly mortgage and rent payments. At the current mortgage rate, buying is cheaper than renting in each of the nation’s 100 largest metro markets.
“Rates are now on the rise and are likely to keep rising, thanks to the strengthening economy and the Fed eventually trying less hard to keep rates low,” writes Trulia Chief Economist Jed Kolko on the Trulia Trends blog. “But it will take big rate increases to turn off prospective homebuyers. At today’s prices and rents, rates would have to rise to levels we haven’t seen in 20 years before renting is cheaper than buying a home on average across the country.”
Experts agree that even though interest rates are rising modestly, we’re still not all that far off from recent lows. Rising home values, new housing inventory and an improving employment outlook make now a good time to be a homebuyer.
(Editor’s Note: Andy Warren is President of Maracay Homes, the Arizona subsidiary of the Weyerhaeuser Real Estate Company. He serves on the Board of Directors for the Home Builders Association of Central Arizona and Greater Phoenix Leadership; as well as the Board of Directors and as an Executive Committee member with the Greater Phoenix Economic Council. He is also an active member of the Urban Land Institute)