The Center for Economic and Policy Research (CEPR) today released an updated Housing Calculator. It enables users to compare owning a home with renting in 379 metropolitan areas."CEPR's calculator provides potential homeowners with an easy way to calculate how much a new home will cost them over time. It compares the amount of additional cash available to a renter with the amount available to a home buyer who sells a home at a specified time in the future. Users simply punch in data such as house price, region, down payment, mortgage rate, tax bracket, and the year they expect to resell the house."
From CEPR:
"Over the last decade, there has been a record increase in U.S. house prices, with prices rising by more than 70 percent after adjusting for inflation. By contrast, rents have risen only slightly more than the rate of inflation over this period. People who buy a home at a bubble-inflated price -- and then see the price plummet in the crash -- may lose much or all of their equity, which comprise the bulk of most household's wealth. Homeowners are still taking on mortgage debt rapidly, even as their homes have largely stopped appreciating in value. Homeowners increased their mortgage debt at a 5.4 percent annual rate in the first quarter of 2007, adding debt at an annual rate of $510 billion. This pushed the ratio of equity to value to a record low."
I did the math and my/we savings on renting instead of buying is $175,000 in the New York Metropolitan area. Try it.
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