High DC rents make buying a wise decision
Stricter home-lending standards and lingering doubts about the enduring strength of the housing market have led many citizens to choose renting over buying a home. For some, this is a financial necessity, as down payments and closing costs can be too much for them to manage. Others, though, are opting to rent despite having enough assets to buy. In some areas, this strategy is logical, but in others experts are suggesting the opposite tack. For example, CNN recommends that consumers may want to buy one of the homes for sale in Washington, DC, instead of renting an expensive apartment in the city.
Even though home prices have risen significantly in the last few years - 11 percent since 2009, according to the S&P/Case-Shiller index - rents have climbed even more drastically. Induced by a strong economy and the city's renowned universities, many new residents have flooded the District's boundaries since the recession, and, subsequently, propped up demand for rental units throughout the District.
According to CNN, this has raised the median rent in the city to $1,850, which is one of the highest in the country. Desirable neighborhoods such as Adams Morgan, Capitol Hill and Cleveland Park have all seen sharp rises in demand, and rents there have followed suit.
Buy or rent equation
When deciding whether to buy or rent, many experts suggest a simple equation to find out at what point purchasing a property is a good idea. This point, often referred to as the "breakeven horizon," demarks when total rent costs would surpass the cost of home ownership. By factoring in all the costs associated with a home purchase - such as mortgage payments, property taxes, closing costs and so on - and comparing them to monthly rent payments, it is possible to evaluate areas where buying a home makes more sense than renting an apartment.
According to CNN, the District is one of the most obvious places to choose buying over renting. With a median home price of $379,100, it would take just three and a half years to break even after buying a house instead of renting. The source reports that shrewd homebuyers can find great deals in some of Maryland's suburbs, which are close to DC's jobs and attractions but far enough away to keep home prices relatively low.
If you are thinking of moving to the district - or are already renting there - it might make sense to consider buying real estate in Washington, DC, instead of paying a monthly check.