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WSJ: Buying A Home Trumps Renting In Chicago

WSJ: Buying A Home Trumps Renting In Chicago

I know I've posted on this before but once again an analysis has come out that claims that buying a home trumps renting one in Chicago. A couple of weeks ago the Wall Street Journal wrote an article on the renting vs buying dynamic in 28 metropolitan areas and in 13 of those markets, Chicago being one of them, it was in fact cheaper to buy than to rent. According to the WSJ data the average asking rent in Chicago was $1062 per month, while the monthly mortgage payment plus taxes and insurance was $1002.

However, as with most of these types of analyses, it's a bit more complicated. For one, they assumed a 4.5% mortgage rate, which overstates the cost of buying. However, on the other hand, they apparently assigned no cost to the 20% down payment so that understates the cost of buying. There is also no provision for maintenance on the purchasing decision and no mention of monthly assessments so who the heck knows how they are handling that.

Given all these shortcomings, the most interesting part of their article is the graph that compares the cost of buying to renting over time - buying has been gaining ground as prices and interest rates have come down while rents have been increasing.

Since "individual results may vary" I always recommend that interested people use the New York Times rent vs. buy calculator. You can tweak the tax rate to reflect maintenance costs and assessments. The one thing I like most about their calculator is that it allows you to explicitly deal with future rent increases and home price appreciation (remember those days?).

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