Rent vs. Buy in Silicon Valley?
 
A recent study by the California Association of Realtors indicates that in the current market environment, prospective first-time buyers will save monthly out-of-pocket expenses of owning versus renting.
According to the study of two household scenarios, the First-time Buyer’s monthly PITI would be $1,630. That is $250 less than the Renter’s monthly expense of renting a 3-bedroom/2-bathroom apartment including renter’s insurance for $1,875.
In 12 months, the First-time Buyer household saves nearly $3,000 in monthly out-of-pocket housing expenses compared to the Renter household. That differential jumps to nearly $15,000 in five years of owning a home.
With home prices currently low it is a good time to buy for long term appreciation potential. It is common wisdom that money is generally made by buying well rather than selling well. It is also important to have a long term perspective in owning real estate and understand that the market is cyclical.
In addition there are still income tax benefits of ownership, which has been one of the primary motivators for home purchasing. Click>here for more information and assumptions of the CAR study. Click>here for lots of interesting graphs on the California Housing Forecast, including the Rent vs. Buy study.
