Earlier in the year, home buying was still considered to be the more pricey route to go when compared with renting in most parts of the Bay Area. But the tables seem to have turned recently, as both the buying and rental market have heated up all around the bay the last few months.
Real estate site Trulia recently dug into data on both rental prices and homes for sale across the U.S. in the months of June, July and August and based on their analysis, it’s cheaper to buy than to rent a comparable property everywhere in the U.S., including the bay area.
In the San Francisco metro area, it was 28% cheaper to buy than rent. It was 31% less expensive to be a homeowner in the San Jose metro area and in the Oakland metro area, a homeowner would save 41% over renting.
Courtesy of Trulia.com
Trulia’s report made several assumptions:
Cost of homeownership assumes that the home is sold after 7 years and includes 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. Monthly costs are based on the average across all properties listed in the metro area, including those for sale and those for rent, in summer 2012.
They also assumed that a homebuyer was able to secure a 3.5% mortgage rate, was in the 25% tax bracket and was able to put a down payment of 20%. Any change in these assumptions, such as having a higher mortgage rate, a lower tax bracket and selling sooner could significantly change the outcome. With a mortgage rate of 4.5%, being in the 15% tax rate and only a 3 year window, the tables turn once again and it is 28% cheaper to rent than to buy in the SF metro area.
And while buying may be the way to go in the long run, many are held back by the difficulty in saving for that 20% down payment (especially in the bay area where homes are pricey) and you’re much less flexible in relocating once you’ve got a mortgage.
You can play around with different assumptions on Trulia’s fun interactive infographic here to see what how your particulars work out. Is it better to rent or buy for you?
Article source: http://blog.sfgate.com/ontheblock/2012/09/19/what-its-cheaper-to-buy-than-rent-in-the-bay-area/