Graphic from The New York Times.
On Thursday, The New York Times ran a series of articles about home buying, many of which highlighted the newspaper’s new and improved Rent vs. Buy calculator. The calculator was created several years ago by graphic editors Kevin Quealy and Archie Tse.
“It is an interactive calculator that uses formulas to calculate the year-by-year costs of buying and renting,” Kevin Quealy told UrbanTurf in 2010. “It then determines which is cheaper after each year.”
Here is how the calculator works. Users input their monthly rent and their desired home price point, in addition to a slew of variables like down payment amount, probable mortgage rate, property taxes, condo fees and the rate of home value appreciation and rent increases in their area. The calculator then creates a graphical representation of the time it takes for one to break even on their investment, and the return on that investment going forward. The calculator also lets you compare figures across a theoretical number of years lived in the property, so you can see the cumulative savings or loss.
The new version of the calculator operates the same way, but adds in some important new variables. Now, it allows users to include the annual ROI, the annual inflation rate and the marginal tax rate, and also makes it easier for users to change inputs. Mike Bostock and Shan Carter worked with Archie Tse on the new version.
“The most important new feature is probably the ability of users to dynamically change any of the inputs using a slider and immediately see how it changes their outcome,” Tse wrote to UrbanTurf. “I think it’s surprising to see how much a small change in your outlook on home price appreciation and rent rate increases effects the answer for you. We’ve also been having fun exploring how differences in mortgage rates can affect whether you should have a larger or smaller down payment.”
The one issue that remains with the calculator is that it does not allow you to enter a variable home price appreciation or rent increase percentage. In other words, if a user enters a home price appreciation rate of 5 percent a year, that level of appreciation is assumed for the entire period of the loan.
Also, there are a variety of non-financial intangibles that the calculator does not take into account. Economics reporter Neil Irwin has a great piece on those intangibles out today that frankly any prospective home buyer should read.
UrbanTurf has tested out the calculator at times over the last few years. For those interested in giving it their own test drive, click here.
This article originally published at https://dc.urbanturf.com/articles/blog/the_new_and_improved_rent_v._buy_calculator/8520.
Most Popular... This Week • Last 30 Days • Ever
The change would allow for an 80-acre portion of DC's 272-acre Armed Forces Retiremen... read »
The Capitol Hill home has been listed for sale that has a number of serious security ... read »
The listing will hit the market on Wednesday, according to the Washington Business Jo... read »
About a month ago, UrbanTurf examined how condo and co-op prices were driving home pr... read »
When Wall Street buys most of the homes on your block; the $5 million houseboat; and ... read »
With interest rates reaching their highest levels in 22 years, it is critically impor... read »
Just before the holiday, UrbanTurf is taking its semi-annual look at the neighborhood... read »
Plans have been filed with DC's Historic Preservation Office to convert the building ... read »
An application filed with DC this week signals the end is nigh for a McDonald's locat... read »
Madison Highland Live/Work Lofts has plans in the works to convert the 12-story offic... read »
With this weekend's DC houseboat tour a day away, UrbanTurf thought it only fitting t... read »
President Obama travels to Denver this morning to sign the stimulus bill that has bee... read »
In this week's installment of Ask An Agent, a reader wonders if there is a rule for h... read »
As The Wharf prepares to begin construction, DC's houseboat community heads to its ne... read »
In this week's installment of Ask An Agent, a reader asks a fairly common question th... read »
DC Real Estate Guides
Short guides to navigating the DC-area real estate market
We've collected all our helpful guides for buying, selling and renting in and around Washington, DC in one place. Start browsing below!
Intro guides for first-time home buyers
Awesome and unusual real estate from across the DC Metro