How much does renting instead of buying really cost you? There have been reports coming out prettyconsistentlythe past few years showing how much more it costs to rent inDenver verse buying.It is about 50% cheaper to buy rather than rent in Denver right nowwhich equates to a couple thousand more to rent per year.Depending on your situation,theflexibilitymight be worth it.But howmuch does it cost youwhen you look at it over a longer period?
I found this great article on Market Watch about the $700,000 plus mistake that nearly six out of 10 millennials will make, click here. It breaks down the difference between renting verse buying for the standard loan term of thirty years and the results are startling.
Considering that the median home in America costs $190,000 and historic annual home price appreciation is around 3%, according to data from RealtyTrac, a millennial who bought an average home today (and put $19,000 that's 10% down) with a 30-year fixed rate mortgage at 4% would outright own a home worth $426,000 in 2045, and pay a total of roughly $373,000 for it (mortgage, taxes and insurance included) a difference of $52,000. Plus, after 30 years, the person could live rent-free a compelling prospect for retirement.
If that same millennial rented let's assume he pays $1,312 a month in rent this year (which is the average fair market rent for a three-bedroom nationwide, according to RealtyTrac) and his rent appreciates at a rate of 2.7% a year (the average increase over the past decade, RealtyTrac says), he'll end up shelling out nearly $717,000 in rent over that 30-year period all without an asset to show for it in the end.
These numbers are pretty revealing and it makes me wonder why so many millennials are renting instead of buying right now. When you factor in the low, low interest rates we are seeing right now (3.5%) and that appreciation in Denver is expected to be closer to 10% this year, this $700,000 number could easily be much closer to a million for Denver residents. If you are renting and have been thinking about buying, let's talk.
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