Late last year, Fletcher Wilcox, a well-respected real estate analyst with Grand Canyon Title, prepared a report entitled “Should you Rent or Buy a Single Family Home.” It analyzed whether it was cheaper to pay rent or pay a mortgage on a single family home. Based on the average rental rate and average purchase price in the Greater Phoenix area, his calculations indicated that buying made more sense.
Mr. Wilcox created a common financing scenario – an FHA loan, to acquire a single family home at the average purchase price at the time of $171,500. He arrived at a $972 monthly payment to buy that home, with $200 a month for taxes and insurance, or a total $130 less than the average rental rate of $1,302. A guesstimate of the tax deduction permitted on mortgage interest and taxes lowers the effective mortgage payment to $1,002 per month, or $300 less than the average rental rate.
Using a VA loan increases that advantage, but even a monthly payment under conventional financing beats the average rental rate of $1,302. Since the date of that report in November, our average purchase price in the Greater Phoenix area has declined to $157,800, so if Mr. Wilson prepared his analysis today, he would show even a lower estimated cost of ownership.
Others have noticed the advantage of buying over renting here. Using median rent and values instead averages, real estate search website Trulia came to the conclusion that it makes more financial sense to buy in 72% of the major metropolitan areas. Trulia’s index lists two of the top five U.S. cities favoring ownership as Phoenix and Mesa.
Why pay rent when its cheaper to own? Contact me at firstname.lastname@example.org and I will be happy to help you get out of your rental and into your own home in the greater Phoenix/Scottsdale area. Don’t wait until interest rates rise and inventory becomes scarce, take advantage of our buyer’s market now.