Is it cheaper to rent a home or to buy one? With rents rising much faster than home prices, the answer these days definitely comes down on the buy side. And, in Chicagoland the difference is even greater than in much of the country.
Jed Kolko, chief economist for Trulia, published a research study a few weeks ago showing that across America it is cheaper to buy than to rent – some 38 percent cheaper. Kolko also looked at specific metro markets, and his study found that in the Chicago area it is 47 percent cheaper to buy than to rent.
This research assumed that buyers had a 30-year fixed rate loan with 20 percent down and a 4.5 percent interest rate, itemized their income tax deductions, are in the 25 percent tax bracket and stay in their home for seven years. Kolko also wisely used a very conservative annual price appreciation number – between 1.7 and 3.1 percent, depending upon the metro area. (Most experts say you should never look at a house as a short-term investment – in other words, less than five years.) Of course, as the assumptions change, the benefits of renting vs. buying change, too.
Interestingly, the rent vs. buy math indicates that, under current conditions, buying beats renting until mortgage rates hit 10.6 percent, then renting becomes cheaper than buying.
If you are thinking of buying at Newport Cove, our waterfront development on the Chain O’ Lakes near Antioch, Illinois, we do work with our customers to make that happen. Besides helping locate mortgage professionals who can adapt to your particular needs, we also are open to discussing rent-to-own or mortgage assistance programs.