Credit Infocenter

Buying a Home Now Cheaper than Renting?

February 25th, 2011 · No Comments · Mortgages, Real Estate

by Kristy Welsh

(Last Updated On: February 25, 2011)

For many years, the smart money was on buying a home. After the real estate crash, many people opted to rent rather than sink hard earned cash into an asset that was sure to depreciate.

The pendulum has swung back again – the laws of supply and demand have now driven rents sky high, and made rentals in some markets tough to find. For instance, in Phoenix, although there are a record number of foreclosures, most of these properties have been trashed by disgruntled owners or vandalized after sitting empty, making them undesirable as a rental. Good clean properties are scarce and demand premium rents.

Does it now make sense to buy a home? In some cases, yes, especially if you still have good credit. Even if you don’t purchase a foreclosure or short sale, real estate prices have dropped like a stone in many areas of the country, making monthly mortgage payments cheaper than rent. I found this average rent and mortgage payment by city comparison at

Phoenix Area Average Rents/Mortgages:

Based on the asking rental price. Source:


These are average values, but since I live in Phoenix metro, I have the inside scoop. You can find a nice, clean 3brm home out here for $70K. No kidding. Granted, I’m talking a significant distance from the center of town, but still an amazing price. The mortgage payment on something like this would be around $700/mon.

In addition to mortgage payments being competitive to rental payments, some people overlook some other costs of renting, namely storage fees and insurance. For those people who moved an entire household into an apartment, unless they’ve sold many of their possessions in the process, they’ve had to rent a storage unit for their extra belongings. In addition, to reduce risk of being sued because someone was injured on their property, some landlords are insisting on renter’s insurance, adding $150 to $300 per year to the cost of renting.

Then there’s the tax savings of home ownership to consider. The IRS allows homeowners to deduct the interest on their mortgage, which could be a significant cost savings of several hundred or even thousands per year.

To truly assess the costs of renting vs. ownership, Smart Money has a rent-or-buy calculator.

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