Renting vs. Buying: HOA Fees May Make Renting More Appealing than Buying

~Interesting Case for Renting~

house-keysRecent results from Trulia’s Rent vs. Buy Report reveals that purchasing a home with a traditional 30-year mortgage and 20 percent down payment is cheaper than renting, but additional fees from the homeowner association (HOA) can make renting seem more appealing especially for New York and Honolulu residents whose HOA fees are considerably higher. Trulia also has a tool called the Rent vs. Buy Calculator that allows consumers to compare renting and buying costs using whatever data they chose to enter such as prices, rents, or HOA fees.

“If you are a homeowner association member, you need to factor in your HOA fee into your monthly housing costs,” Ralph McLaughlin, housing economist at Trulia wrote. “What these fees cover varies, but they can include everything from landscaping and maintaining public spaces to utilities and cable TV. The fee amounts also vary and, in some areas, you might have to pay a lot.”

The New York and Honolulu metro areas have medium HOA fees of $575 and $438 per month. Fort Myers, Florida; Riverside, California; and Miami, Florida finish up the top five with median HOA fees between $310 and $356. HOA costs can be the deal breaker on whether to buy or rent in markets like these.

According to the report, buying a home is still a cheaper option than renting in all 100 largest U.S. metro areas. Purchasing a home is 35 percent cheaper, a 2 percent increase from last year, and the growth of home prices has soared over rents nationally.

Additionally, there are two more statistics that appeal to homeownership that are mentioned in the report data. First, the 30-year fixed-rate mortgage rate has decreased to 3.87 percent as of April 15, a fall from last years’ rate of 4.5 percent. Second, the home price gain was only 3.9 percent, not a huge jump from last years’ gain of 3.7 percent in rentals. These two trends have made homeownership an even more affordable and appealing option compared to renting.

Under the assumption that buyers will get a 3.87 percent mortgage rate on a 30-year fixed-rate loan with 20 percent down, will stay in the home for seven years, and also itemize their federal tax deductions and remain in the 25 percent tax bracket, buying is 35 percent cheaper than renting nationwide.

Top Five Locations Where Homeownership is a Tougher Choice

  1. Honolulu, HI,
  2. San Jose, CA
  3. Lancaster, PA
  4. Sacramento, CA
  5. San Francisco, CA

Top Five Locations Where Homeownership is an Easier Choice

  1. Sarasota, FL
  2. Fort Myers, FL
  3. Baton Rouge, LA
  4. New Orleans, LA
  5. Miami-Fort Lauderdale, FL
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