When you compare the cost of owning a home to renting, you’ll find that buying may soon make more sense, Paul Diggle, a housing economist at Capital Economics, told MSNBC.com.
Diggle’s analysis of the housing market showed a 33 percent drop in home prices, record-low mortgage rates (with 30-year fixed-rate mortgages available under 4 percent now), and a 15 percent rise in rents since the housing market turned sour are making more consumers take a closer look at buying. We find this is applicable to the “Sierra Foothills” of El Dorado, Placer, Amador and Sacramento Counties of California.
“The median monthly mortgage payment of about $700 has fallen to about the level of a median monthly rent check,” an article at MSNBC.com notes about Diggle’s analysis. “If mortgage rates keep falling and rents keep rising, the equation will tip even further toward owning.”
Case in point: Diggle says that a buyer who purchases a median-priced home and stays there for at least seven years would likely come out ahead by about $9,000 than if they chose to rent for those seven years. Diggle’s calculations factor in rents continuing to rise 3 percent a year. Plus housing prices staying flat for the next two years before rising in 2014.
But while more Americans may be motivated to buy, many still can’t, Diggle notes. Home owners who lost their home to foreclosure may be forced to wait on the sidelines before owning again, other Americans may not have a 20 percent down payment that more lenders are wanting, lack a high credit score to qualify for the best financing, or have steady employment.
Source: “Home Buying Could Soon Beat Renting,” MSNBC.com (Jan. 23, 2012)
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