There are many variables that go into the decision to Buy versus Rent. I found a neat tool that might be useful in determining whether or not the decision to Buy makes sense. Before I give you the link, I would like to show you a scenario or two I am working out on my own.
Buying Versus Renting
Buying a home would save you approximately $71,374 (in today's dollars) over 15 years, compared to renting, based on the assumptions you provided.
What is neat about this is that based upon the following variables and assumptions that buying definitely works. It shows that in 15 years, you would own your home, and would have saved $71,374.
Rent assumptions
$
$
$
(0-10) %
Purchase assumptions
$
%
$
(0-30) % 5.5
(1-30)
(0-10) %
$
$
$
Other assumptions
(1-30)
(0-50) %
(0-12) %
What if we drop the price by another 10%? I mean after all the harbinger's of doom are still preaching that the sky may yet to fall some more. (**Note** In multiple blog posts of late I have demonstrated that per sources such as Zillow that the Athens market has actually 'increased' over the past year on the average.) Let's also looks at what happens if rates jump 'another' half a point from 5.5 percent to 6 percent. This can happen you know. Remember rates in the 4.75 percent range a few months ago. The are floating between 5 1/8 - 5.5 percent right now.
Buying a home would save you approximately $73,595 (in today's dollars) over 15 years, compared to renting, based on the assumptions you provided.
So basically the assumption of a price drop and a half a point increase in rates caused you to save another $2200 over the life of the loan or about $146.66 per year. To wait for 'another price drop' would save you lunch money each month.
Am I calling for that mythical bottom of the market? I don't really have to call for it. If you want to own your own home and understand the math behind it, it would seem that owning today even if the market drops lower still makes sense. If you want to play around with some custom scenarios like I just did, please go to http://www.trulia.com/rent_vs_buy/.
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