This is a guest post by Jennifer Riner. Jen Riner is a real estate marketing professional whose work has been featured on Hot Pads, Forbes, Inman News, and more.
After four years of steady annual increases, rent prices decelerated in the last year. Although tenants across the nation can breathe a collective sigh of relief in the hopes that their next lease renewal rate won’t be quite as steep as the last time around, renting is still not the most economical housing choice.
According to a recent Trulia study, homeownership is 33.1 percent cheaper than renting for households that stay for seven years and can afford to put 20 percent down upfront. Those calculations are based on a 4.1 percent 30-year-fixed mortgage rate, or the average in the spring of 2017. At that time, the median home in the U.S. was $289,801 while the median rental was $1,765 per month.
Although in most US metros it is clearly better to buy than rent, the financial advantage of buying is not as drastic as it was last year. Mortgage rates are up (albeit slightly), rent price growth is slowing and home values boosted in 93 major metro areas. If you plan to buy, now might be a good time to get serious.
To get a better idea of the current market, consider the DC metro and several of its popular Northern Virginia cities. The calculations include the June increase to interest rates.
Since 2016, median home values in the D.C. metro increased 4.3 percent while median rents dropped 4.3 percent. The financial advantage of buying a home in D.C. plunged 19.8 percent in the same one-year period. Currently, home buyers in greater D.C. could anticipate a 26 percent savings when buying compared to leasing, down 2.8 percent from the spring. The percentage saved is based on a median rent price of $2,100 per month and a median home value of $381,004.
Fairfax real estate is relatively reasonable at a median price of $525,000 which averages out to $2,265 per month over time when expenses like insurance, taxes and down payments are considered. Meanwhile, the median Fairfax apartment ($2,500) costs an average $2,387 each month when averaged out over time to include add-ons like renter’s insurance. Overall, buying in Fairfax is currently 14 percent cheaper than renting.
Chantilly & Reston
Home buyers in both cities can expect to see a 22 percent monthly savings compared to renters. With median home prices of $430,000 and median monthly rents of $2,250, buying is clearly the better deal – all costs considered.
With a median home price of $585,000 and a median rent of $3,200 per month, homes for sale in Arlington save an average 26 percent. When averaged out over time, renters pay around $3,056 per month while homeowners pay a lower $2,265 per month.
In Ashburn choosing to buy instead of rent is a little tougher, especially if the Federal Reserve raises interest rates again. There is only a 10 percent benefit to buying in this city. The Ashburn median home price is $509,000 and median rent is $2,290.
Ultimately, the decision to buy instead of rent isn’t just about the monthly savings. Your ability to shell out enough for a down payment, among other factors, plays a considerable role in your path toward homeownership. To figure out how much you’ll have to put down upfront to save on housing payments, use a mortgage calculator to determine your probable monthly costs.