You noted, properly, that making the comparison for a single year ignored some important benefits of ownership (including steady mortgage payments versus rent payments that are likely to increase). However, with a current rental cost of $24,000 per year and a true after-tax ownership cost in the neighborhood of $40,000 per year for the case above, the rental case generates very substantial cash savings from the start.
You make a great point about rents increaseing while mortgage payments remaining the same (if you get a traditional 30yr fixed rate loan). Although you would initially pay more for mortgage payments, taxes and insurance at some point the cost will be the same, and towards the later part of your 30 years you would be paying less then rent. We would have to speculate on rent increases to come up with the exact dollar amount, but in this basic scenario it would be something to think about. For those fortunate buyers that purchased homes 2002 and prior, their payments may already be equal to or lessor then current rent for the same home. In today’s prices it may take longer then 5 years to get to break even point, but it will still happen within the loan term.
