According to Trulia, buying a home is 38% cheaper than renting a similarly sized home nationally. Here in Tampa Bay, that number jumps to 52%. While the assumption among the public is generally along these same lines, it’s nice to see some numerical confirmation of that assumption.
Additionally, Trulia breaks down their assumptions in their model in a wonderful act of transparency. From the article, their map averages use these criteria:
- Calculate the average rent and for-sale price for an identical set of properties. For this report we looked at all the homes listed on Trulia for sale and for rent from December 2013 through January 2014. We estimate prices and rents for similar homes in similar neighborhoods in order to get a direct apples-to-apples comparison. We are NOT just comparing the average rent and price of homes on the market, which would be misleading since rental and for-sale properties are very different: most importantly, for-sale homes are roughly 50% bigger, on average, than rentals.
- Calculate the initial total monthly costs of owning and renting, including the mortgage payment and rent, as well as maintenance, insurance, and taxes.
- Calculate the future total monthly costs of owning and renting, taking into account price and rent appreciation, as well as inflation.
- Factor in one-time costs and proceeds, like closing costs, down payment, sales proceeds, and security deposits.
- Calculate the net present value to account for opportunity cost of money.
With all of these things taken into account, we think that Trulia got it right. Thanks again to Keeping Current Matters’s blog for pointing us to this.