Saturday, March 23, 2013
It's officially 26% cheaper to buy than to rent. Or it would be, if only there was something to buy.
The 26% figure applies to New York. (In Detroit, it's 70% cheaper to buy than to rent, but who cares?)
But no matter where you are, it appears that right now you're better off buying than renting, at least partly due to low interest rates.
The real estate website Trulia reports the gap in New York between buying and renting is the fourth smallest in the country. San Francisco has the very smallest, at 19%.
According to Trulia, Honolulu (23%) and San Diego (33%) are also among those with the smallest difference. Even there, it's significant.
Of course, this does not include properties that are bought and quickly resold. You have to own the property for more than three years (Trulia says three; the New York Times says five) to amortize the costs of buying and selling and make these numbers work.
Cities where there is the largest difference between renting and buying, besides Detroit, are Gary, Indiana; Memphis, Tennessee; Dayton, Cleveland and Toledo, Ohio, and a few other places where you'd have to live for a while to understand why someone would want to. (Nobody ever sang about how they left their heart in Cleveland, or if they could make it in Dayton they'd make it anywhere, or that Toledo, Toledo is a hell of a town.)
Here's the link: Trulia: 10 Markets Where Buying is a No-Brainer
It's interesting to note that the cities where there's the biggest difference between the costs of renting and buying are considered by many (ok, me) to be less desirable places to live than those at the other end of the range. (San Francisco, San Diego and Honoluly are by no means The Big Apple, but at least they're warm.) Have no idea why there should be a correlation, but there seems to be one.
But enough with the snide remarks about America's heartland. I have no quarrel with those who prefer Ohio or Indiana or Tennessee. To each his own, and my own is New York.
Here's a link to a New York Times site that helps you figure out the difference in cost between buying and renting a particular property: NY Times: Buying VS Renting Calculator
As you'll see, the Times formula is quite complex and sophisticated and allows for appreciation of the owned property and loss of income on the down payment, among other things.
The chart is from 2011; I'm not sure the numbers in the example would work today, but you can plug in your own numbers.
But it's all moot, at least to some extent, because in New York, as in much of the rest of the country, inventory is at a 12-year low. Buying is a great option, but there's not much to buy.
A report prepared by the appraisal firm Miller Samuel says that there are just 4,749 units for sale in New York, the lowest number since the firm began tracking in 2000.
And relief is not in sight. While there are new developments coming on the market (most of them large, luxurious and expensive condos), Jonathan Miller says that developments comprise only 10 to 20% of the total market. Learn more at Miller: Manhattan's Inventory Skyfall
So, bottom line, if you can find something to buy, by all means buy it. (If you need any help, give me a call. 917-991-9549. Any time. And by the way, if you want to sell, I will be way beyond thrilled.)