Rent vs buy smack down 2024

2024 Rent vs buy comparison

I recently read this article in the Wall Street Journal “There’s never been a worse time to buy instead of rent,” and was drawn in by the sensational headline. If you read the article, you can see that it looks pretty bleak for buyers. It says that home buyers will pay a whopping 52% more per month than renters. But when I dug into the data, it turns out that that was not the full picture. Watch the whole video to see why:

In the video, I go through an apples to apples comparison of 1 bedroom apartments in Chicago, an area with plenty of data available that’s in middle of the country. But I thought it would be helpful to do some more comparisons, as different markets have different things happening right now in the rental market.

So here are some more comparisons of one bedroom apartments for rent versus buy in different parts of the country. The reason I chose one bedroom apartments is because rental and home buying data isn’t divided into houses vs. apartments, so it’s safer to assume that one bedroom dwellings are apartments, not free standing homes. After all, we don’t want to compare two different types of housing stock, homes vs. apartments, because that would muddy our findings!

Also, I’m using 8% as the mortgage rate, just to be on the very conservative side. We haven’t seen 8% rates in a couple of months – mortgage rates as of today are around 7%. So, the picture looks even a bit rosier for home buyers that even what’s below, given this fact.

Atlanta

In December, the average 1 bedroom rent was $1,709, while the average 1 bedroom sold was $264,200. If you assume 10% down and an 8% mortgage rate, the monthly mortgage payment would be $1,745.

Houston

In December, the average 1 bedroom rent was $1,341, while the average 1 bedroom sold was $136,700. If you assume 10% down and an 8% mortgage rate, the monthly mortgage payment would be $903.

Denver

In December, the average 1 bedroom rent was $1,912, while the average 1 bedroom sold was $311,400. If you assume 10% down and an 8% mortgage rate, the monthly mortgage payment would be $2,053.

Tampa

In December, the average 1 bedroom rent was $1,688, while the average 1 bedroom sold was $201,100. If you assume 10% down and an 8% mortgage rate, the monthly mortgage payment would be $1,387.

Conclusion

Despite the scary headlines, buying has considerable advantages over renting even at an 8% mortgage rate, the highest it reached in the past 24 months. Yes, home prices have increased, but rents have also increased considerably. And if you get a 30 year fixed rate mortgage, your monthly mortgage payment is fixed for 30 years, while your rent just keeps going up.

Also, don’t forget about equity considerations. With each mortgage payment, part of that payment goes to paying down the loan amount, which builds equity – part of your net worth. To learn more about the importance of home equity, watch this video.

It’s important to do the math. Make apples to apples comparisons. The news runs off of sensationalism, but don’t let the histrionics of the media carry you into a worse financial decision.

Don’t think you can afford homeownership right now, but want to be able to in the future? Get my free resource The Formula for Homeownership. It gives you a solid roadmap to get you where you want to go.