To Buy...Or To Rent In Denver?

In a recent study by the real estate listing site Zillow, it has emerged that buying is now a more cost-effective option in the majority of city and metro areas in the country. This is especially true of large markets such as Las Vegas, Chicago, Miami, Dallas and of course Denver.

Although it was found that renting was still a better decision in certain areas such as Honolulu, San Francisco and San Jose, it was found that in the majority (75 percent) of the 200 metro and 7,500 cities analyzed, buying was the better option.

The key thing to keep in mind is the break-even point of buying which is when the cost of renting is matched by ownership costs, taxes, fees and other costs. So even though the initial cost of buying is more expensive, the break-even point is now three years or less in cities such as Denver. This could be attributed to several reasons, one of them being that rental rates have increased by 5 percent due to lowering rental inventory which in turn has arisen from an increase in renters. This has been driven by credit issues resulting from job loss, short sales and foreclosures.

Zillow’s survey compared rental costs to all major homeownership costs, including down payments, closing fees, mortgage payments, utilities, maintenance costs and property taxes. The data also factored in estimated home price appreciation and rent increases along with inflation and tax deductions.

On the other hand, homes are at a high level of affordability currently, this combined with low interest rates and the increase in rental rates makes buying a better financial decision than renting, providing that the buyer is credit worthy and intends to live in the home for three years. In order to get the best bargains buyers need to be prepared to be a bit patient and search for homes in high growth areas with high list-to-sell ratios.

However, although buying is more cost-effective option generally, for certain people renting is still likely to be the best decision. This could be for those looking to live short term in the area or those with credit issues.