PMC Mortgage Lender's Blog

Until recently, home ownership was no bargain compared to renting, according to Paul Diggle, a housing economist at Capital Economics.

Recent data from the U.S. Census Bureau and published statistics from Thomson Datastream indicate that rising rents and falling mortgages are tipping the scales towards home ownership.

Diggle says the median monthly mortgage payment has fallen to about $700 which is close to a median monthly rent check.

Several economic factors have converged at the beginning of 2012 presenting a strong financial incentive for renters to buy a home. This has historically never happened before.

“There has been a 33 percent drop in home prices,” says Diggle, “a plunge in mortgage rates and a 15 percent rise in rents since the housing crash.”

Much of the decision to buy a house still depends on your personal finances and preferences, your career or family life, or level of financial security.

But if you’re comparing just the cost of owning vs. renting, buying a house is the better choice.

For someone who plans on staying put for seven years, they would come out ahead by about $9,000 if they bought a median-priced home rather than being a tenant in a median-priced rental.

Dingle has taken into account the total cost of owning versus renting by including closing costs, maintenance, insurance and property taxes, tax savings from mortgage deductions and gains or losses from home equity.

His calculations assume that rents keep rising by about 3 percent a year and that house prices stay flat in 2012 and 2013 and begin rising in 2014 at about 3 percent a year.

Renters need to consider broker fees and future rent hikes and make assumptions about future trends in housing prices and rents in order to make an informed decision to buy a home.

However, falling home prices combined with record low interest rates and rising rents may soon prompt renters to take a second look at buying.