Renting or buying a house in the USA: which is more profitable in the long run
To determine the “true” value of an average home, a company GOBankingRates conducted a study that analyzed the cost of renting or buying, as well as the expected value of an average home in the US by 2048 year.
How much does my house cost?
To find out how much your home really costs, the current average cost of a home in the United States, equal to $220 100. To predict changes in house values over the next 30 years, the study calculated the change in the cost of housing in the US from 2009 to 2019 year, based on data from the Zillow property rental and sales site. This 10-year period includes the economic downturn and the consequences of the collapse of the housing market, which helps to make the forecast more conservative and realistic. The projected 10-year-long rise in housing prices was around 43% or 3,4% per year.
The next key analysis was to determine how much rental housing would cost over the next 30 years. Based on the current average rent of 1441 dollars, the study calculated that the average monthly rent will reach 2 723 dollars in 30 years. This means that in the period from 2018 to 2048 year you will spend on rental housing in the United States approximately $720 079.
Rent vs. buying a house
Now we compare the cost of rent with the cost of buying a house, that is, with a mortgage and regular monthly payments on it. With an 30-year mortgage with a fixed interest rate based on the current average cost of a home in $220 100 and the current average mortgage rate, you will pay 1121 dollars per month for the next three decades, avoiding the problem of increasing rental rates due to fixed monthly payments.
For 30 years with payment of 1 121 dollars per month — or $13 452 per year — a mortgage will cost you a little more $400 000. This means that you will save approximately $316 519, having bought a house, compared to rent, which, as was calculated above, will cost for the 30-year period in $720 079.
In addition, by 2048, your home is for $220 100 will cost about $640 000, based on the average increase in property prices in 43% per decade or 3,4% per year. When you combine the amount saved as a result of ownership ($316 519), with income from the growth in the value of your home in 30 years ($639 346), you get the "real" value of your home, which is approximately $955 865, if you compare the purchase with the rental.
Again, it is important to remember that these calculations were done for the United States as a whole. Depending on which state or city you live in, your home may cost much more than the amount indicated in the study.
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