New York Times Rent Vs Buy Calculator WORK
So a proper calculator would start with current rents, and costs, risk free returns and some guess about an appropriate risk premium. That will give you current fundamental value -- what a buy-and-hold-forever investor would be willing to pay now, given current expected returns. Current prices in nearly all cases, and certainly at OBBP, are far above fundamental value.
new york times rent vs buy calculator
Its not that complicated. Over the long, rents and home prices go up at the same rate. You should have the same rate for both in such calculators. The average, since the 1890s per Case-Schiller, is about 5%. Nominal, per year.
I know that this is a housing index and not a condo index, but the return have been much more volatile than a simple plug number in the calculator gives credit for and I would expect that individual sub markets would be even more volatile. The average annual return since the index inception in 1987 has been 3.05% with a 7.6% annual standard deviation. Setting a two standard deviation range and a seven year investment horizon, a quant would expect annual home price appreciation to be -2.7% to 8.8% over any given seven years. That is a huge range and the levered nature of home purchases makes this dominate the buy/rent decision.
Your problem with the NYT calculator seems to be that it won't let you incorporate a short-term price adjustment. It's really easy to add one on your own and I'll leave it to your financeguy skills to do so. If you want some help, the Cleveland Fed calculator allows different expectations for short-term (1-3 year) prices movements and price changes after that.
Universities often offer on-campus graduate housing to international and sometimes domestic students. In some high cost-of-living cities, the on-campus housing is subsidized and therefore highly desirable and competitive. You should ask older students already living in on-campus housing for tips on how to gain entry. At other universities, on-campus housing is a convenient but more expensive option in comparison with off-campus housing. However, paying more for rent may be a frugal choice if it sufficiently reduces your living cost in other areas such as transportation. If you are living in on-campus housing and desire to move off-campus, start looking for housing options a few months in advance of the end of your current lease.
There are a plethora of buy vs. rent calculators out there, but virtually all of them make at least some fixed assumptions. They might assume that you could invest the difference between renting and buying in the stock market at 8% return while you disagree, or they might assume that your property tax rate is 3% when it is only 0.5%.
To clarify the real costs of ownership and renting, and make them comparable, I built the calculators linked below. They are both in Google Sheets so that you can inspect the calculations being made and change them as you see fit. Feel free to share as well!
Your article says to multiply the mortgage payment by 1.8x and if you can rent for much less, renting is probably better. I think the 1.8x comes from dividing 1 by 55% (based on the statement that 45% of real estate investor income goes to non-mortgage expenses). However, this produces a much different answer than what the NYT calculator would suggest. Thoughts?
This is a very simplistic example. If you would like a more complex calculator that can help you assess if homeownership is right for you, The New York Times has a great Rent vs Buy Calculator based on 21 different variables that will help you determine if renting or buying is more financially beneficial in your specific circumstances.
However, that gap is narrowing as some major cities. Cities primarily on the west coast, have seen the difference in cost between renting and owning a home dwindle to as low as 3.5%. Here in the Triangle, it would be challenging to find a scenario in which renting is the most cost effective choice. Again, the Times rent vs buy calculator is a terrific tool.
As you fill in the numbers, the calculator keeps a running tab of all the expenses of renting and owning. It also estimates what The Times calls opportunity costs, such as the money you could have earned if you invested your down payment instead of using it to buy a house.
RentCafe reported that in Seattle, WA, renter-occupied households earning over $150K per year multiplied 7.4 times and the number of Charlotte NC high-income households living in rentals has grown by 400%.
To get a better view of your buying vs rent decision, try out the rent vs buy calculator from the NY Times. This widget still requires your input on forecasting a few things, yet it might help clarify the pluses and minuses for you.
There are many "calculators" used to compare renting versus buying. There are strong financial reasons for owning rather than renting. The difference in wealth between the average homeowner and the average non-homeowner in the U.S. is quite large, with much of it due to owning a home. 041b061a72