Is It Smarter to Rent or Buy a House? — Dollars and Sense
The collapse of the housing market has led to historically low interest rates on mortgages, leading many renters to wonder if now is a good time to purchase a home.
If you’re mulling it over, consider this: new research says that in most areas, buying is now cheaper than renting.
Data from the real estate site Trulia indicates that in the top 100 markets in the US, the only metropolitan areas where it’s still less expensive to rent than buy are pricey San Francisco and Honolulu. But in older cities with high vacancy rates and land to spare, like Detroit and Cleveland, buying a house could actually save you money.
In general, experts say that if buying is 15 or more times more expensive than renting, then renting is the smarter option. So, for example, in Detroit, where it’s 3.7 times more expensive to buy than rent, buying is deemed a good use of your money. But in San Francisco, purchasing a house is 17 times pricier than renting — so the wisdom dictates renters should stay put.
Even if you do decide to house-hunt, bear in mind it’s a lot harder now to be approved for a mortgage than it once was. And if losing your job would mean you’d have to move to find another one, you may want to avoid putting down roots just yet.