jztz’s formula is on spot… If you forget about depreciation and only consider the average monthly mortgage interest over the comparison period in the ‘Cost of Ownership’ calculation, you’ll get a flat-market number for comparison purposes. And to be even more buy-bullish, you could multiply the monthly rent by a factor to approximate the average effect of a 10% per year rent increase (1.34 for a 3-year window) [(1.1^number of years/number of years)+ 1]. Once you have a spread sheet set up, start looking at places to buy that could reasonably replace the house you’re in. Plug in the purchase price, the HOA and the amount of your down payment. For me, I can’t find a place that even comes close to Cost of Ownership being less than Cost of Rental. How does this get any better if I have to add depreciation to the Cost of Ownership? How can the rate of depreciation (slow or fast) make any difference. If I rent and continue to invest my rent over ownership dollars in a CD (5.4% at Countrywide), it should compensate for even a mild rate of INFLATION. Even if it comes out that buying is slightly better, consider all of the risks of ownership… repairs, special assessments, etc. Given today’s prices, I can’t understand why anyone would buy for financial reasons. The difference in cost is the cost of your non-financial justifications. If pride in ownership is worth it, then go for it. Just know how much you are paying for it!
