I have been reading articles lately talking about the price of homes, interest rates and rents and they all seem to say that it is cheaper to buy than to rent. I would say this is really market specific but today we will talk about the market I know, and that is the Austin Texas Real Estate market. The number of people moving to Austin is obscene right now which means the rents just keep going up and up, coupled with rates at near/all time lows the numbers work. I am going to show with numbers a few specific examples. First I will use a specific home for sale right now in the Circle C area in southwest Austin and also use a home from the Maple Run neighborhood in S. Austin. The price ranges of Circle C range from $250,000 to above $700,000. The Maple run neighborhood ranges from around $145,000 to about $265,000+. Since we have not asked for permission to post the properties in question we will leave out the address but use real numbers.
Circle C: Today I will use a 3,208 sq ft house in Circle built in 1994 with a list price of $350,000 with property taxes of $6873 per year (which is with a homestead exemption). This home should lease in the $2400 – $2795 range per month. If you calculate a payment with 5% down at 3.875% interest with taxes and insurance the payment comes out to $2,198.79 using $750/year in insurance. That is $200-$658 less than what it costs to rent with only 5% down!!! You would have to pay about $5,500 to move into the property with deposit and first month’s rent and the down payment is only $17,500. So it is very clear that with today’s rates buying a home in Circle C is much cheaper than renting one.
Maple Run: For Maple Run I will use a house that is listed for sale for $179,900 with taxes of $3294 and estimated insurance of $750. This home should rent for $1250 – $1375/month. With the same assumptions as above the payment should come out to $1140/mo. This is a savings over renting of $109 to $296/mo!!! Your move in to lease the home would be in the $2700 range and 5% down would be in the $8,995. So the savings are very clear.
With all that said buying in Austin is certainly much better than leasing. Not to mention the tax savings you get for owning a home that we have not even addressed as well as the way the market seems to be going at this time there seems to be a significant opportunity for upside potential from market appreciation. If people keep buying the way they are right now it stands to reason that prices could rise significantly in the near future.
So the moral of the story? Buy now! lock in these low rates and stake your claim:)
Here is a link to a recent article from CNN with their comparisons: http://cnnmon.ie/QhRW9v