Apr
04

Perfect Storm Makes Buying Homes in Chicago Cheaper than Renting

April 04, 2013

buying homes in ChicagoThinking of getting out of your rental due to rising rents, but not sure if it is the right move financially? Data recently released by Trulia Blog in their rent versus buy comparison found that purchasing a home in Chicago was 50 percent cheaper than renting.

However, this situation is not likely to last for long as Chicago new home prices are beginning to rise after post housing bust lows; these increases are expected to start outpacing rent increases over the next few years. A second major factor driving what could be called “the perfect storm” for homebuyers, is a rise in mortgage interest rates, which are still at historical lows.

To calculate the rent versus own index, Trulia did the following:

  1. Calculated the average rent and for sale prices for an identical set of properties by looking at all the homes listed for sale and for rent on Trulia from December 2012 to February 2013. Prices and rents were estimated based on similar homes in similar neighborhoods in order to get a direct apples-to-apples comparison. They did NOT just compare the average rent and average price of homes on the market, which would be misleading because rental and for sale properties are very different; most importantly, for sale homes are 47 percent bigger, on average, than rentals.
  2. Calculated initial total monthly costs of owning and renting, including maintenance, insurance and taxes.
  3. Calculated future total monthly costs of owning and renting, taking into account price and rent appreciation as well as inflation.
  4. Factored in one-time costs and proceeds like closing costs, down payments, sales proceeds and security deposits.
  5. Calculated net present value to account for opportunity .

It may not be a good time to purchase a new home for everyone. But, for those that are looking to make the move from renting to home ownership in Chicago, the numbers are saying, the time is right.

About The Author

Kevin B. Morrow

Read All Stories By Kevin B. Morrow

Kevin B. Morrow is a 25-plus year veteran of sales, marketing and operations with an emphasis in the homebuilding industry. As Director of Operations for the Atlanta office of Marketing RELEVANCE, Kevin strives to integrate the different departments of our organization to deliver an excellent, unique and rewarding client experience.

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