Prospective buyers are always agonizing over whether it would be better to give up renting and buy a home. Now more than ever, it is much better to buy than rent; however, there are exceptions and considerations to be made.
Buying is cheaper than renting in 98 out of 100 of the largest metro areas in the U.S., the two exceptions being San Francisco and Honolulu. This is due to the ever falling house prices and historically low mortgage interest rates. In contrast, rent costs continue to rise.
When Is It Better to Rent?
Some people are not in the position to buy due to their financial situation and paying rent makes it more difficult to save the money necessary in order to make a down payment on a home. It is also inadvisable to buy when paying a rent that is lower than average and there are no implications that this will rise in the near future. Other reasons not to buy may include plans to move within a few years, living in one of the super expensive housing markets, or needing to buy a home much larger than the one currently being rented. A final factor to make buying an undesirable move is when the potential buyer is currently receiving high returns from a different cash investment.
Multiple online calculators exist to help renters decide whether buying would be a good move. In general, however, this can be worked out simply by multiplying monthly rent by 240. If there are suitable homes on the market for less than the total, a better long term solution would be to buy whenever feasible.
When Is It Better to Buy?
People who do not mind relocating can benefit from knowing where the cheapest metropolitan areas to buy are located. The least expensive of all is currently Detroit where it is only about 3.7 times more expensive to buy than to rent. Other hotspots for buying include Oklahoma City, Dayton, Ohio, Warren and Toledo.
It is also possible to find a less expensive neighborhood in a city in which it is typically expensive to buy. One example is New York City where it is more cost effective to rent than buy in Manhattan but cheaper to buy in Westchester County, a suburban district only a few miles north. Another consideration is the size of the home. Sometimes renting can be more affordable than buying for larger properties.
Professional real estate experts such as Ken H. Johnson, professor of real estate at Florida International, believe house prices are soon to rise. If it is true that the housing market is on the road to recovery, property will again be a safe investment making now one of the best times to buy.
A return of the housing market’s former strength in fact makes the most expensive markets some of the most desirable options as they result in the safest investments. As they are geographically unable to expand, house prices remain high in these areas.
This guest post was provided on behalf of a Toronto real estate agent at My Toronto Realty. If you’re considering owning real estate in Ontario, visit some of the best condo listings in the GTA, http://www.mytorontorealty.com/search-toronto-condos