When deciding to buy a home, it is important to take a look at the finances between renting and buying. There are many calculators available that can help you decide if it is a better financial decision to rent or to buy. While writing rent checks often feels like throwing money away, and owning seems like an investment because of building equity, it is not always that simple.
Factors like how long you plan on living in a home, how much you have for a down payment, what sort of mortgage rate you get, and whether or not you are the kind of person that will make a different investment if you continue renting can impact the finances of the decision.
Mortgage Rates are Down, Price of Rent is Up
As we know, the mortgage rates are the lowest they have ever been, and at the same time, rents across the state are increasing, according to the Denver Post.
Of course, home ownership is more than just a financial question. There are many reasons that a person or family decides to buy, and there are many benefits to home ownership other than building equity.
Better to Rent or Buy? Depends on Location, Location, Location (surprise!)
Aside from personal finances, the Rent or Buy question is greatly impacted by the location. Home buyers are able to find incredible deals in many places due to the current market conditions. But, in some cities, like New York, it makes more sense to rent.
Trulia, a real estate website, recently released a list that evaluates Rent versus Buy for the top 50 most populous cities. Their analysis is based on the price of renting or buying a two bedroom condo, apartment or townhome. Buying included all costs, like cost of closing, taxes and insurance.
Makes financial sense to buy in Denver and Colorado Springs, depending on the situation.
Colorado had 2 cities that were evaluated, Denver and Colorado Springs. These cities did not make the Top 10 of the list, unusual for a Colorado City.
Colorado Springs was found to have an average list price of $144,074, compared to an average rent of $773. The Price-to-Rent Ratio is 16.
Denver has an average home listing price of $283,432, compared to the average price rent of #1,315. The Price-to-Rent ratio is 18.
According to Trulia, a city with a Price to Rent Ratio of less than 15 has housing that is much less expensive to own than to rent. So, Colorado Springs is just outside, clocking in with a Ratio of 16.
Trulia says that with a Ratio between 16-20, ownership can be more expensive than renting, but can still make financial sense to buy depending on the situation.
A Ratio greater than 21 mean that it is much more expensive to own than to rent.
Our exclusive buyers agents can conduct a Rent versus Buy analysis based on your finances, and the city you are interested in buying. Fill out our Find an Agent form to speak with an agent with Colorado experience today!