“McBride crunched the numbers in a pre-bubble era (2004) for a home purchased at $200,000 by a buyer in the 27 percent marginal tax bracket. Factoring in a 30-year mortgage, $1,200 in annual home insurance, closing costs of $5,500 and maintenance costs of $100 a month, along with property taxes, he calculated that it would take a selling price, 10 years later, of $395,404 just to break even. His conclusion gave Arzaga’s view credence: “Homeownership may not be the moneymaker you think it is.”‘
By 2004, the bubble was well on its way, and near a peak in many markets. Of course renting made more sense using 2004 numbers. Greg McBride should know this since he was reading the bubble blogs back then.
OTOH, if you use today’s numbers in some of those same markets, the numbers tell a different story: it’s actually better to buy than to rent. In many areas, your PITI payments will be lower than rent (which is why so many investors/landlords are buying right now).
The benefit of buying your primary residence isn’t that you’ll make lots of money when you sell, it’s that you will have a place to live that is/should be paid off by the time you retire.
Some of the comments after that article also wisely point out that the RENTER pays most of the PITI and maintenance costs on a rental, not the landlord (unless the LL wants to lose money, year after year; in which case, s/he won’t be a landlord for very long).
Ultimately, it depends on one’s job and income prospects over time. If you need to sell every couple of years, it’s probably safer to rent. If you have skills that will be in high-ish demand in a particular area, and pay looks like it will be consistent or rising over time for the foreseeable future, then it’s probably better to buy if monthly PITI costs and rents are fairly equivalent.
