Positive numbers in today’s economic news are not all that hard to find. Jay Lybik, Vice President of Market Research for Equity Residential, discussed the rent vs. own debate and other demographic data during the NMHC Apartment Strategies Conference in January.
Following are some of his points:
As part of today’s debate about whether renting or owning makes more financial sense, analysts must carefully consider the real numbers when comparing rent rates to mortgage payments by factoring in down payments, Lybik says.
Mortgage payments (including taxes and insurance) that assume a 20 percent down payment in some metros result in situations in which owning appears cheaper than renting.
When looking at a 5 percent down-payment scenario (and where PMI must be added to the cost in addition to taxes and insurance), the 5 percent down payment yields a situation in which the rent and house payments are nearly equal. But keep in mind, these purchasers must come up with a significantly higher down payment.
Based on national average home prices today in many markets, a 20 percent down-payment equates to $20,000 to $25,000. That amount soars to more than $80,000 for home purchases in some more popular (pricey) markets such as New York City or northern California.
Furthermore, The Brookings Institute, a policy think-tank, recently reported that only approximately 25 percent of U.S. households today could come up with even $2,000 cash if given three days to do so.