Rent vs Buy: The Rise of Housing Costs

Over the next few weeks, we’ll be featuring snippets from an article authored by the National Apartment Association (NAA) and the National Multi Housing Council (NMHC) entitled Don’t Buy the Myths: Renting Can Be a Smart Decision. The Rent vs. Buy article focuses on 9 widespread misconceptions regarding the benefits of homeownership over rental apartments.

MYTH# 4: As an owner, my housing costs will stay constant. I won’t have to worry about rent increases.

Reality: A mortgage payment is only one of many housing costs.

Last week, we discussed the Hidden Costs of Owning a Home, and concluded that monthly housing costs will amount to your mortgage multiplied by 1.4. This extra 40 percent includes maintenance costs, property taxes, and homeowners insurance, all of which can add up quickly.

Not only must you account for these costs, but you can also expect them to increase. Property taxes and homeowners insurance have risen significantly in recent years.

Homeowners saw annual property tax hikes averaging 4-5% (for a total increase of 18%) between 1997 and 2001. According to the Insurance Information Institute, the average premium for homeowners insurance rose from $488 in 1999 to $764 in 2005.

Rent increases pale in comparison to the rates at which these two major costs increase over the years. Instead of pouring money into a money pit, you could be saving, investing or going on vacation.

For more information, check out the full Rent vs Buy article, which can be found at the MyNewPlace Apartment Guide.

Check back next week when we will feature Myth #5, “Buying a House is a Safe Investment.”

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