Buying versus Renting
A report published by economist Jed Kolko of Trulia in March of 2013 states that on average it is 44% cheaper to own a residential property than to rent a similar property in the 100 largest metropolitan areas in the US. In Philadelphia, it is 40% cheaper to buy than to rent. The report considers the following in arriving at this conclusion:
- Similar homes in the similar neighborhoods were compared, not the average rent and average sale price of homes overall.
- Initial and future costs of renting and buying were considered including maintenance, insurance, taxes, price and rent appreciation and inflation
- One time costs such as closing costs, security deposits, etc. were included as well
- The initial set of assumptions were that a buyer put down 20%, took out a 3.5% 30 year mortgage, was in the 25% tax bracket and itemized deductions on their income tax.
The prices of owning and renting were...