It is now far cheaper to rent a house than it is to own that same house, even with the deductibility of mortgage interest figured in. It is possible to rent a good house for $1800/month. That same house would cost at least $700,000. Assume 6% interest we can see that a buyer loses at least $4,936 per month by buying. Renting is a loss of course, but buying is a much bigger loss.
Renting:
Rent: $1,800
----------------------
Monthly Loss: $1,800
Buying:
Property Tax: $486 ($729 per month at 1.25%
before deduction, $486 lost after deduction.)
Interest: $2,333 ($3500 per month at 6%
before deduction, $2333 lost after deduction.)
Other Costs: $450 (Insurance, maintenance,
long commute, etc.)
Principle loss: $1,667 (Modest 3% yearly loss on $700,000.
Reality will be much worse.)
----------------------
; Monthly Loss: $4,936 |
