|The Finances of Renting vs. Buying
Posted: 14 Sep 2012 04:00 AM PDT
Trulia reported this week that homeownership is 45% cheaper than renting in the United States. Jed Kolko, Trulia’s Chief Economist explained:
(Trulia’s methodology is explained here.)
This news did not come as a surprise to us as we have reported that today’s rental market definitely favors the landlord. Below is a graph of how rental prices have increased recently and where they are projected to go over the next few years based on a report from Marcus & Millichap.
It cost more to rent than own right now. And you don’t get any of your rent back in the future. History shows us, in the long term, you can build equity in a home. Dr. Ken Johnson earlier this year explained in a post on this blog:
The Joint Center for Housing Studies at Harvard University released a study last year titled America’s Rental Housing: Meeting Challenges, Building on Opportunities. In the study, they actually quantified the difference in family wealth between renters and homeowners:
What Does This All Mean?
We believe David Shulman, senior economist with the UCLA Ziman Center for Real Estate said it best: