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RENT vs BUY? Which is really more affordable?

The answer for the Seattle metro region is a resounding BUY! Don’t rent!

The real estate web site, Trulia, periodically releases their Rent vs Buy Report about whether it is more affordable to rent or buy… Their latest report is from Summer 2012, and according to their statistics, it is 42% more expensive to rent than buy in the Seattle metro area. In cold hard cash (the best kind), that translates to $715 per month that you are spending on rent that could be used for… ??

 

Buying cheaper in every large metro area

Buying is cheaper than renting by several hundred dollars a month in every large metro. Yes, every large city. While the percent difference in buying versus renting may be smaller in San Francisco (-28%) than in almost all other metros, the annual dollar savings is big ($899) because the rents and home prices there are so high – even a smaller percentage difference means a big dollar difference.

Basic assumptions

To calculate whether renting or buying costs less, Trulia assumed that people:
  1. Can get a low mortgage rate of 3.5%,
  2. Itemize their federal tax deductions,
  3. Are in the 25% tax bracket, and,
  4. Plan to stay in their home for seven years.
Not all of these criteria fit you? Not to worry… They also show how changing these assumptions can affect your rent-versus-buy math. Click for the interactive map that you can personalize.
Of note is that this data does not include appreciation values, or how much your home will be worth if you sell it in 7 years. You don’t think property values in Seattle and Bellevue and Issaquah and Newcastle, etc. are not going to increase? And, by the way, anyone out there really think that rents won’t continue to rise?!
NOTE:
The cost of homeownership assumes the home is sold after 7 years, and includes the closing costs, maintenance, insurance, property taxes and other costs. Cost of renting includes security deposit and renters’ insurance. Monthly cost is based on net present value of costs over 7 years, and on the average across all properties listed in the metro area, including those for sale and those for rent, in summer 2012.