Rent vs Buy: The Rise of Housing Costs
Over the next few weeks, we'll be featuring snippets from an article authored by the National Apartment Association (NAA) and the National Multi Housing Council (NMHC) entitled Don't Buy the Myths: Renting Can Be a Smart Decision. The Rent vs. Buy article focuses on 9 widespread misconceptions regarding the benefits of homeownership over rental apartments.
MYTH# 4: As an owner, my housing costs will stay constant. I won't have to worry about rent increases.
Reality: A mortgage payment is only one of many housing costs.
Last week, we discussed the Hidden Costs of Owning a Home, and concluded that monthly housing costs will amount to your mortgage multiplied by 1.4. This extra 40 percent includes maintenance costs, property taxes, and homeowners insurance, all of which can add up quickly.
Not only must you account for these costs, but you can also expect them to increase. Property taxes and homeowners insurance have risen significantly in recent years.
Homeowners saw annual property tax hikes averaging 4-5% (for a total increase of 18%) between 1997 and 2001. According to the Insurance Information Institute, the average premium for homeowners insurance rose from $488 in 1999 to $764 in 2005.
Rent increases pale in comparison to the rates at which these two major costs increase over the years. Instead of pouring money into a money pit, you could be saving, investing or going on vacation.
For more information, check out the full Rent vs Buy article, which can be found at the MyNewPlace Apartment Guide.
Check back next week when we will feature Myth #5, “Buying a House is a Safe Investment."
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May 15th, 2008 at 5:27 pm
Hi Matt,
Thank you for that information. I was in the market to purchase a home for roughly 7 months. The process was stringent and nerve wrecking. I understand that in the long run owning a house can be very beneficial if managed properly, so that's why I was in the market.
In any case, I decided to take a break from looking and focus on renting. In no time I found a wonderful apartment community in Virginia Beach, VA that has a ton of wonderful benefits. I am very happy and hope to get back in the market to buy in 12 - 24 months.
To find properties for rent, whether a house, condo, or an apartment, a good site is Virginia Renters. You can find or list properties on this site for rent http://www.virginiarenters.com/.
This site is good to find properties for rent on the local level. They also own other state sites like http://www.northcarolinarenters.com/, http://www.pennsylvaniarenters.com/ and more. They have for all 50 states.
Anyway, I look forward to reading your next blog on buying a house as a safe investment.
June 9th, 2008 at 3:38 pm
I agree with your post. I have developed my own theory on this topic and was wondering your opinion. If interested please checkout my post on 555 theory.