Arvest Newsroom

Buying a Home is Cheaper than Renting in Many Arvest Markets

LOWELL, Ark. — Is renting a home really saving consumers money in the current housing market? While renting can be a convenient option, in the Winter 2014 Trulia Rent Vs. Buy Report, Trulia’s chief economist, Jed Kolko, found that across the United States, owning a home is, on average, 38 percent cheaper than renting.

For some consumers, a monthly mortgage payment could actually be lower than their current monthly rental payment. This can be for a number of reasons, including that homeowners are able to lock in a mortgage rate and their monthly payments, while renters may have to deal with their monthly payments increasing over time. The price-to-rent ratio is a good tool that consumers can use to help determine the favorability of renting or buying a home based on current market conditions.

This price-to-rent ratio is determined by taking the price of a house and dividing it by the annual cost of renting a similar home. For example, if a consumer is weighing the decision to buy a $150,000 dollar home versus paying $1,000 dollars per month to rent a home for one year, they would divide $150,000 by one year’s rent ($12,000 dollars) to yield a price-to-rent ratio of 12.5. Experts suggest* that a price-to-rent ratio above 20 suggests renting as the preferred alternative, while a price-to-rent ratio of below 15 indicates homeownership may have more benefits.

“The math of renting vs. buying a home varies in different markets and for different financial situations. We know that each person is unique, and, at Arvest, we are ready to help assess your personal situation and what works best for you right now,” said Shawn Karnes, Arvest Mortgage Sales Manager. “We also know that your total cost of buying a home depends on a lot of constantly changing factors – such as how much home prices rise or fall. We are here to help customers navigate all of those variables and find the home that works for them.”

Even though home prices have started to rise in some markets over the past year, low mortgage rates have still allowed homeownership to be more cost effective than renting. There are two simple reasons why consumers should not be afraid to enter the housing market right now: rates are still at historical lows and home prices are still affordable. In fact, home prices are predicted* to rise only between three and five percent this year.

“A first-time homebuyer in 2014 can still get between four to five percent fixed interest rate on a 30 year loan,” Karnes continued. “Historically, that is a great deal. Home prices may rise a little this year, but at the end of the day, our loan officers are here to help customers navigate the whole mortgage process. We work with our customers to get them a deal they can afford and find a place they can call home for a long time.”