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The Chief Economist of Trulia, Jed Kolko, reported that homeownership is 45% cheaper than renting. Kolko explained:
“Homeownership is cheaper than renting in all of the 100 largest metros, by a wide margin. Despite the recent price rebound, rents continue to rise faster than prices, and mortgage rates are near record lows.
Homeownership makes the most financial sense for people whose strong credit scores let them snag the lowest mortgage rate and who get the biggest benefit from deducting mortgage interest and property taxes from their income taxes.”
(Click to read Trulia's full expaination here.)
This should not come shocking to most of us, as we already know the rental market today favors the landlord. Marcus & Millichap created a graph and report showing the cost increase of renting a home, as well as a prediction of the increase in upcoming years.
(Click to read Marcus & Millichap's report here.)
Currently, it costs more to rent than own a home. No rent is returned to you upon the end of your lease, unlike the sale of a home.
Last year, The Joint Center for Housing Studies at Harvard University released a report called America’s Rental Housing: Meeting Challenges, Building on Opportunities. The difference of family wealth between homeowners and renters was shown in numbers on this study.
“[R]enters have only a fraction of the net wealth of owners. Near the peak of the housing bubble in 2007, the median net wealth of homeowners was $234,600—about 46 times the $5,100 median for renters. Even if homeowner wealth fell back to 1995 levels, it would still be 27.5 times the median for renters.”
Dr. Ken Johnson explained well in a blog earlier this year:
“It appears that homeownership creates extra wealth mainly through its ability to force owners to save rather than through property appreciation. Thus, homeownership appears to be a self-imposed savings plan, which through time leads to greater wealth accumulation as compared to comparable renters. In short, buying a home makes Americans save.”