A home that recently hit the market in DC.
Despite rising home prices, it is still cheaper to buy than to rent in the DC area, according to a report published today by Trulia. However, that calculation is tipping more in favor of renting.
Trulia determined that buying is 17 percent cheaper than renting in the region. Renting would begin to make more sense than buying in the region if interest rates rose to 5.8 percent. When UrbanTurf has reported on this analysis in the past, the percent in favor of buying has been closer to 30 percent.
As we have reported when covering this analysis in the past, it is important to understand the criteria that Trulia uses when determining if it is cheaper to buy than rent in a metropolitan area.
The company calculates the figures assuming a 20 percent down payment on a 30-year, fixed-rate mortgage financed with a 3.85 percent interest rate. It assumes people itemize their federal tax deductions and are in the 25 percent tax bracket, and factors in renovation and maintenance costs, as well as insurance, utilities, and property taxes at the average metro property tax rate. For renters, the company tacks on renters’ insurance.
Perhaps most significant in the calculations is that Trulia assumes that a homeowner will live in the home for at least seven years.
If you don’t agree with the assumptions, Trulia has a rent-versus-buy calculator, so that users can play around with specific numbers.
This article originally published at https://dc.urbanturf.com/articles/blog/trulia_buying_17_cheaper_than_renting_in_the_dc_area/10486.
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