Most “rent-or-buy” assessment articles one sees are not practical, leave out several hidden fees of getting houses, and are usually outright real estate market propaganda, if not out and out lies. However, at least one, oddly enough from a real estate company, has been introduced that's this side of honest. Source for this article:
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Lame factors forgotten



There are a ton of articles on business news online websites lately about whether it is cheaper to buy or to rent, but they all basically say the same thing.



Usually, things like closing fees, insurance, taxes, maintenance and the higher cost of utilities in houses compared to apartments, aren't factored in. Many of these comparisons also leave out the truth that a lot of people do not stay in one home for a whole decade, let alone long enough to pay off a 15- or 30-year mortgage. Every now and again, an honest one will come out.


Sometimes they are right



CNN Cash recently posted an article titled “Buy or Rent? 10 Major Cities,” which purports to show the “break-even point” in 10 large cities with astronomically high rent. Real estate site Zillow.com has calculated said point depending on average rent and average home price and factored in cost of maintenance, property taxes, closing fees, costs of utilities, and so forth, which the business calls the “break even horizon,” according to its blog.



The break-even horizon in Chicago is 2.8 years. After 34 mortgage payments, it is better to buy than to rent. This considers that the average home prices in the city are $209,300 while rent averages $1,430. That is just one example in the CNN article.



It actually does make sense. Assuming median home value in Chicago and the average rate of 3.55 percent Annual Percentage Rate for a 30-year fixed mortgage, the recent average according to the Washington Post, the monthly payment is only $945.70, using Bankrate's mortgage calculator. The typical closing expenses on a $200,000 home, according to Kiplinger, is about $4,070, which, with a monthly savings of about $484, is recouped in 9.5 months, though naturally before taxes, insurance and so forth. Put simply, mathematically, they are on to something.



Price-to-rent ratio not similar


Many rent-or-buy comparisons, as Zillow points out, use what's called the price-to-rent ratio, or in other words, the ratio of price to annual rent. Anyone suggesting the price-to-rent ratio as a significant rubric should most likely have their head examined; other expenses of homeownership, such as closing fees, taxes, insurance, higher cost of utilities and so forth, are too large to ignore.



The New York Times has a calculator where all the numbers can be put in for a better estimate, and these kinds of resources are much more significant about the numbers.



Sources



CNN

Zillow

Kiplinger