
Is It Better to Rent or Buy? - ovechtrick
http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html?_r=0
======
mbostock
Author here. Thought I’d highlight my favorite, perhaps non-obvious feature:
the slope of the charts tells you whether the variable is positively or
negatively correlated with the cost of buying. And depending on the settings,
that slope can change from positive to negative.

For example with the defaults, the down payment chart is flat. This means the
total cost of buying is relatively unaffected by the size of your mortgage.
Felix Salmon pointed out this demonstrates the Modigliani–Miller theorem:

[http://en.wikipedia.org/wiki/Modigliani–Miller_theorem](http://en.wikipedia.org/wiki/Modigliani–Miller_theorem)

Of course, there’s still a big intangible difference between having debt and
not having debt, like your ability to respond to market or income changes. And
in an inefficient market, loans can be more or less expensive.

Playing with the variables and seeing slopes change from positive to negative
or vice versa is interesting, too, because these suggest different optimal
decisions. Like as your investment return rate goes up, the down payment slope
becomes increasingly positive — meaning when stocks are doing well (and
assuming mortgage rates aren’t also going up), it’s better to have a smaller
down payment and put more money into investments. To a lesser degree, your
marginal tax rate changes the slope of the down payment as well, by
discounting the mortgage interest payments.

The magnitude of the slope also gives a sense of your risk: you can see how
sensitive the equivalent rent estimate is to small changes.

~~~
NoMoreNicksLeft
> Of course, there’s still a big intangible difference between having debt and
> not having debt,

Both renters and owners need a place to live in the future, assuming they're
not dead. If we exclude those who live with mommy and daddy or mooch off of
other people...

Well, then whether the debt is formal with a mortgage or not makes little
difference. Even renters are on the hook to come up with $1000 for the month
of October 2016. It's just not in writing.

~~~
fspeech
The main problem with owning is illiquidity and associated immobility. If you
rent you can quickly down shift if you run into trouble. If you own the
transaction cost is much higher if you need to move.

The main advantage of owning one's own residence is tax and stability (the
flip side of the illiquidity problem). Owner's equivalent rent is not a
taxable income. Capital appreciation works in your favor rather than against
you when you rent.

In short owning one's own home is both economically and psychologically
rewarding if you have long term stable income.

~~~
NoMoreNicksLeft
> The main problem with owning is illiquidity and associated immobility. If
> you rent you can quickly down shift if you run into trouble.

Where are you getting these lease-free rental units?

True, you're less on the hook with a 12 month lease, and the liability is
lower than a 30 year mortgage...

But this is a very mild difference. That job's not going to wait for you to
sell your house _or_ for your lease to end.

> If you own the transaction cost is much higher if you need to move.

If you own, then eventually you're not paying anything at all for a place to
live. And don't bother to mention property tax... you're paying that if you
rent, too, it's just hidden.

This is a manufactured debate, it's meant to appeal to twentysomethings'
bohemian aspirations. Someone wants them mobile so they can herd them around
like migrant workers.

~~~
swalkergibson
This is unequivocally accurate. I own three investment properties plus my own
home. Each one is profitable, including the house that I live in.

It seems to me that the majority of this argument is that rents will not
increase. That is a fallacy. All else being equal, each time you move from a
place, you will likely be paying more rent because of the inevitable march of
time.

~~~
bane
And the only things a renter can do to reduce their monthly housing burden is
downsize or move to less desirable location.

A homeowner's monthly burden is either static or reducing (if they're paying
down the principle early), and they have all kinds of things they can use to
offset that monthly housing burden, like rent spare rooms out, or use part of
their home for a business.

~~~
judk
> rent spare rooms out, or use part of their home for a business.

Renters do this too. they have strictly more options than owners.

~~~
bane
Most rental agreements strictly forbid this. I can't compare irregular
activities to irregular activities because you can always escalate it to some
nonsense money making action favoring one side over another.

But supposing your agreement explicitly allows sub let's without landlord
arbitrary approval, the owner is still coming out on top because the activity
is simply reducing their monthly outlay while still building equity, the
renter is only reducing outlay, but still has zero equity at the end of the
day.

More importantly, my mortgage payment will stay the same, fixed in dollars at
the year I borrowed the money (in my case 2006 dollars). While rents will
continue to increase. For example, at some point in the future, I'll
theoretically even be able to rent a single bedroom out that will cover my
entire mortgage payment simply because of this simple truth. I'll live "for
free". But your base rent price will continue increasing such that you're
monthly burden will stay a significant part of your monthly income. Even if
you pass along as much as you can to a subletter, that percentage won't change
much while mine will continuously reduce.

------
jbarham
This calculator ignores the fact that the market for real estate buyers is
increasingly global but the rental market is local.

If you are in your 20's and grew up in a middle class family in Vancouver,
Toronto, Sydney, Melbourne or Auckland, and have a middle class job, it is
virtually impossible for you to be able to afford to buy a house in the city
in which you grew up. E.g., here's a New Yorker article on the impact of the
global property market in Vancouver:
[http://www.newyorker.com/talk/financial/2014/05/26/140526ta_...](http://www.newyorker.com/talk/financial/2014/05/26/140526ta_talk_surowiecki).

The political fallout from the intergenerational inequality over property
ownership in Canada, Australia and NZ is going to be very interesting to
watch...

~~~
usaar333
> This calculator ignores the fact that the market for real estate buyers is
> increasingly global but the rental market is local.

How is the calculator ignoring this fact? If you think that increasing
globalness will cause home price growth to be higher than inflation/rent
growth, you can modify that parameter.

~~~
jbarham
My point is that for young people who grew up in cities like London or
Vancouver, the choice is not buy or rent, the choice is rent or _move away
from_ the city they grew up in if they want to be able to buy a house on a
middle class salary.

~~~
usaar333
Are you restricting rent to "living with roommates"? And not allowing for
owning to be "rent out to others"?

In San Francisco, owning is incredibly expensive. But so is renting an
equivalent piece of property. So I'm not grasping why the options are limited
to rent or "move away". (aside from exceptions such as renting under rent
control)

~~~
alextgordon
The rents in London are depressed by foreign investors who buy up properties
and rent them out. This reduces the supply of properties to buy, and increases
the supply of properties to rent.

~~~
usaar333
Right so the calculator will tell you that it is better to rent if you believe
the foreign investors are over-optimistic about future home price increases.

(Or alternatively, you don't yet have enough saved for a down payment. In that
case, wait a few years and run this calculation again. If you still won't have
enough money in a few years, your rent is too high for your income)

------
jleyank
I said this when such a thread came up the last time: If you can (easily)
switch jobs without moving it might make sense to buy. If you can't, however,
renting is the safer option as you can move if/when there is a problem with
the job. Domiciles can be rather illiquid at times, which sucks when you need
to move for work.

It's a separate question if it's worthwhile to buy at all, as that's dependent
on geography, present and future market trends, lifestyle choices, ...

~~~
hkmurakami
Some people say "oh you can always rent the house out!" but they often forget
that once they move away and have to hire a property management firm, the fees
that they'll have to pay will erode the rent revenue below breakeven with the
mortgage payments (without such a manager, you can frequently break even or
better vs mortgage)

~~~
gnoway
In at least one US State, your property taxes are different if you're living
in the home vs. renting it out. In my case, losing the homeowner's exemption
would almost double my property taxes.

I'm not sure if you get to deduct property taxes for non-homestead property on
your federal return either. In my case, losing this deduction would force me
to use the standard deduction instead of itemizing. So, a possible double-
whammy.

edit: note this is for the US.

~~~
quesera
> I'm not sure if you get to deduct property taxes for non-homestead property
> on your federal return

You can. Property tax goes on Schedule E as a business expense, just like
insurance, utilities, repairs, etc.

You can also deduct mortgage interest for rental properties.

------
millstone
My wife and I found a great apartment to rent. It was spacious, quiet
location, reasonable rent. We were happy for a few years.

Then the owners sold the complex, and the new owners set out to remodel
everything, very much against our wishes. Construction crews started entering
our apartment. They came in while we were out, laying down plastic sheets and
moving our furniture around. They sometimes came in while I was sleeping, and
while I was getting dressed. It was humiliating: I felt stripped of my privacy
and dignity.

Buying allows you to control your property, but more significant to me is what
renters must endure: arbitrary changes to their home, allowing unfamiliar men
to enter their homes uninvited, etc. As a homeowner, _nobody_ enters my home
uninvited, unless they have a search warrant!

~~~
blub
Which country was this in? I find it incredible...is it everywhere like this?

~~~
millstone
This was in the USA, where the law states that landlords and their hired
contractors may enter during "reasonable hours" for "improvements."

Probably rendering the apartment inhabitable for hours every day is not legal,
and I could have sued for some compensation, but living there had gotten so
miserable with the construction noise and random water shutoffs that I just
wanted out.

~~~
quesera
The law varies by state. The states I'm familiar with have a tenants' right to
"peaceable enjoyment" of their rented premises.

The new owners were trying to smoke you out. They might have been able to
evict you on the basis of their desire to do significant work on the apartment
(again, varies by state), but they probably figured it'd be cheaper to just
make you miserable. Maybe that's legal in your state.

------
blue11
Buying a home is not an investment, it's a quality of life improvement.
Something that I usually don't see mentioned in rent-vs-buy arguments is that
the housing stock that's available for sale can be very different from what's
available on the rental market. The two markets are similar only at the low
end. If you want something nicer, the chance that you are going to find
exactly what you want is very slim. Even "luxury" apartments for example
typically have beige carpet, cheap appliances, cheap bathroom fixtures, etc.
For a private landlord it doesn't make sense to upgrade the property above the
bare minimum either. It's just not cost effective. And if you are looking to
rent a single family house your choice will be even more limited. Now, if you
buy your home, with some reasonably priced improvements you can improve your
level of comfort significantly. Of course, not everybody cares about these
things. If you don't care too much about where you live then renting makes
perfect sense.

~~~
lnanek2
Depends on what you consider quality of life. Mine mostly depends on short
commute time and I don't really care about interior decor beyond there being
WiFi, a shower, and a bed. End result is that renting is a much higher quality
of life because you have more choice of where to rent and can rent the minimum
travel distance to work.

------
marknutter
If you buy, you can do whatever the heck you want to with the house or your
yard. That's true freedom and to some people - myself included - worth every
penny.

~~~
dgabriel
Not true in many, many cases. HOAs, condo boards, zoning laws, and historical
societies can control homeowners pretty well.

~~~
Frozenlock
And you still need to pay taxes (rent) to your municipality (landlord).

So if I summarize, you can't do what you want with it and you need to pay your
landlord.

Why are people calling this 'owning' a house?

~~~
seanmcdirmid
There are countries that lack property taxes, but they tend to be communist
(china) and you are only buying a 99 year lease. Also, the lack of property
taxes doesn't work very well, as it encourages speculation and then sitting on
then property doing much with it waiting for values to rise. Property taxes
enforces mandatory deprecation (you have to make it productive enough to at
least pay the tax) and also funds things like roads, infrastructure and
schools without shady corrupt deals.

~~~
Frozenlock
I didn't say anything about the good or bad of taxes, just asking why people
are using a word when it shouldn't be.

Historical reasons? Delusions? Sales tactics?

~~~
seanmcdirmid
The right to property has never been without responsibility. I can own a house
but then I'm responsible for sharing the costs of infrastructure around the
house. You would find lower property taxes in the states in areas with little
infrastructure (I.e. the bush in Alaska).

Even the city state kings of the first communities needed to provide defense
and such, taxation is the obvious way to do that. Taxation of property is
quite reasonable compared to head taxes.

------
Shivetya
I will tell you my reason to own a home, large at that, even though I am
single. I have seen friends/coworkers have to move after leases were not
renewed. I have seen friends/coworkers lose put up with stuff about their
rentals I would not tolerate as an owner. Sure it go fixed, but damn. I have
also seen them held hostage to rising rents just to renew.

Yeah it can be more expensive at times, more work definitely, but I never have
to worry about someone else deciding they don't want me living here.

~~~
jakebellacera
Absolutely. I guess lots of people, myself included, choose renting over
buying for the main reason that they might find themselves not living in their
current location in a couple of years. For me at least, that is the price to
pay for the freedom of where I live. I know that once I find a place to settle
down I will consider buying, but until then I will rent.

------
bane
Doesn't have the fancy d3 visualization, but here's a better analysis over the
long run (30 years). It even stacks the deck against owning at the start by
assuming 100% financing. There's a few missing components (mortgage insurance
etc.) but even if you add those numbers into this rather detailed analysis,
the conclusion doesn't change. It's actually a good enough analysis that you
can just added or subtract a few other scenarios from it yourself and until
you're describing some very bizarre circumstances, the basic conclusion holds.
All the calculations and reasoning are provided here. Buying is unambiguously
a better use of your money over the long term. It's not even close.

[http://assayviaessay.blogspot.com/2014/04/rent-or-
buy.html](http://assayviaessay.blogspot.com/2014/04/rent-or-buy.html)

Lots of people here describe renting as having an upside because you can
remain location mobile, but that's true of owning as well. The only option at
that point isn't to sell your home and then buy one somewhere else, you can
also rent out your current home, and buy a second one. You can continue doing
that ad nauseum, except now you've convinced other people to pay for your
mortgage instead of you. In the end you'll own a few properties and all the
people who rented from you will own nothing.

Something mentioned in my link but not explicitly in the OP, rent goes up,
mortgage payments stay the same or can go down. Over 30 years, your housing
burden goes down significantly providing you with increased monthly liquidity.

At the end of the day, you own the property at the end and for all years >30
you effectively live for "free" (minus taxes).

I urge everybody reading the OP to take a few spare hours and run the numbers
themselves and see if the easy conclusion here holds out for them.

~~~
techsupporter
That only works if a few things are true, primarily that you can rent your
properties for more than their carrying costs. If you bought and then the
bottom drops out--which, potentially, causes you to need to move for work so
you have to sell low--then this isn't as feasible. Second, you also take on
the risk of being a landlord, so you're now responsible for the maintenance
and upkeep on two or more properties and you get the cost of vacancies.

True that your housing costs will eventually drop to near-zero (upkeep and
property taxes always exist), but renting out your place won't always help you
with that. Besides, more and more people are winding up in blasted Homeowners'
Associations with deed restrictions that prevent renting entirely or more than
a certain, small, percentage of rentals.

Ultimately, as you said, the decision is an individual one, but the conclusion
is usually far from easy.

(Even more bonus fun: Try accidentally being the landlord of someone who
decides to cook meth in one of your rentals. Does your investment risk profile
consider this? Remember that rentals are, fundamentally, investments, unlike
your primary residence which is, first and foremost, your shelter.)

~~~
smrtinsert
I know a multiple property owners. Here's some of the few more common cases as
to why people don't strike it rich immediately when renting out properties.

    
    
      1. abandonment, they just leave without paying
      2. they incessantly ask for features
      3. they hoard
      4. they ruin beyond the security deposit and then dont pay (pets etc)
      5. they consistently pay late
      6. long time unoccupied eats away at profit due to special assessments, condo fees, hoa fees, whatever costs there are in the community
      7. natural disasters (california/florida yikes)
      8. simple non-payment.  try renting in a renter protected area like dc (here's a hint, dont).
    

It's not the road to riches that you hear whispered occasionally. The people
who actually seem to make a profit from it are tied to housing in some way -
either realtors or contractors/property managers and this is because they get
the non-public deals and fix houses themselves. But even they dont make that
much income from until much later and you can be sure they had to work long
for it.

------
mcarvin
For full disclosure I am a founder of the company but many of the mistakes in
math / modeling made in the NYT Tool are corrected at SmartAsset. One example
is the tax consequence of ownership - which because of the standard deduction
is overestimated for lower value homes (<$250,000).

~~~
steven777400
I just wanted to reaffirm what you're saying about the deduction on lower
value homes. When we bought, people were telling us "you get to deduct the
interest, it will be a huge impact!"

Well, these days thankfully, interest rates are relatively low. We paid a
little under $200K for our home, and combined with the married standard
deduction, the interest at first barely even pushed us into the itemize
category. By next year, it won't suffice to even do that and we'll be back to
the standard deduction.

The people who were telling us about how great the deduction is were people
who all had the means to purchase much more expensive homes, and many of them
bought in the past when interest rates were higher and the standard deduction
lower. So it was true for them, and continues to be true for certain segments,
but is not universally true.

~~~
thedufer
It varies widely based on where you live, too. For example, in NYC state/local
taxes are high (these are deductible on your federal return) so anyone with a
reasonably high income is already beating the standard deduction, making the
interest deduction a very large advantage.

------
gfodor
The problem with this (admittedly very good) calculator is there are two key
knobs that require massive amounts of speculation but have a huge impact on
the decision: projected return on investment and expected home price growth.
Good luck predicting either of these over the next 10 years.

~~~
sarah2079
I wouldn't say this is a problem with a calculator. These two factors make
predicting whether renting or buying will be better really hard in some cases,
and the page makes that clear. I see it as an interactive tool that helps you
explore all the variables involved rather than a calculator designed spit out
a clear yes or no answer in every case.

------
iamthepieman
I resisted buying for a long time for mostly flexibility reasons. Eventually,
with a 2.85% 15 year rate and a roughly 2.5% home price growth rate it was
just stupid not to buy.

This is a great tool. I would have to find a rental for nearly half (60%) the
going rate in order for renting to make sense in my area.

------
re_todd
My uncle bought his house and pays $300/month in a neighbourhood where rent is
$1,500/month on a similar home. He is near the end of a 30-year loan, and will
retire soon, paying just property taxes and upkeep. Keeping the long-term in
mind, it seems better to buy.

~~~
bane
We're 7 years in on a home. Originally we had a 30 year mortgage, a couple of
no cost refinances later we're on a 15 year mortgage with a <3% borrowing rate
which is almost free money. We've been paying down the principle as well and
our monthly mortgage is now about 50-60% of the comparable rents and dropping
while rents in my area are rising at 5-6%/yr. We're on track with paying off
the loan inside of 2 or 3 years after which we'll be living in a very nice
home effectively for free. We're even thinking of doing some basement
modifications and renting out the basement as a separate apartment (we never
use the basement for anything the house is >5000 sq ft.) which will completely
cover our mortgage while it's still required or will bring in income after the
house is payed off. Every one of these scenarios would be impossible if we
were renting, all of the money we would have payed in rent would have
disappeared into smoke and we would have been helping somebody else make their
mortgage payments or making them money.

And oh yeah, our downpayment on this house was covered with what we made in
appreciation on our previous house, plus we payed off two cars with it.

We've already made some money on this house as well despite the housing crash.
It's recovered the original value and is in the black now.

------
hashberry
Two important adjustments when using this:

"Investment return rate" \-- Only 4%? An index fund will return higher than
that.

"Monthly common fees" \-- Required if you are considering buying a condo. This
changes the per month rent comparison dollar-for-dollar.

~~~
nilkn
> Only 4%? An index fund will return higher than that.

Just like homes will always go up?

~~~
refurb
That's what makes me laugh when I talk to people who are looking to buy a
home. Despite the housing crash of 2007, when I ask them what would happen if
housing prices go down, they get this disturbed look on their faces and say
"nah! not in this city!!".

~~~
dingaling
As someone who has nearly paid-off a mortgage I have absolutely no interest in
whether house prices increase or decrease.

I'm buying somewhere to hopefully live for the rest of my life. I have no idea
what the current 'value' of my house is, nor will I be enquiring.

If it turns-out that the house eventually achieves negative equity, who cares?
I'm still living in it and that would actually mean my property taxes
decrease...

People still buy cars despite meteoric[0] devaluation.

[0] meteors plummet to the ground, you see

~~~
nilkn
This is great, but it's not a realistic scenario for most folks who aren't
approaching retirement and can't be 100% sure they're never going to move
again. If you ever needed to move, you'd suddenly care quite a bit about the
current value of your home because it will have a tremendous impact on the
actual cost of buying a new home.

~~~
dllthomas
True, but (assuming prices are comparably "up" or "down" in both places and
that you're moving into something of similar size or larger) it's better to
move when prices are low (since a lot of the costs are pegged to the price of
the house).

------
refurb
The calculator is surprisingly accurate based on some math I did late last
year when thinking about buying a house.

A small (1300 sq ft) house in SF can be bought for $750K in some neighborhoods
in the south of the city. The ones in between the fancy ones and the crappy
ones.

I did a pretty detailed analysis of what everything would cost. Loss of
investment income on the down payment, insurance, property taxes, etc. And
came out to around $4100.

You can rent the same house in SF for around $3750/month, so unless you're
assuming a pretty spectacular rise in home values, it doesn't make sense to
purchase.

~~~
greedo
I might be missing something, but if house prices rise just 1% annually, your
differential would shrink dramatically in favor of ownership.

~~~
refurb
In the scenario I modeled, I was assuming around ~3% growth.

Rent control definitely favors renting in a lot of situations. If you were at
the whim of your landlord, then I could see buying being more attractive,
especially in a market where housing prices are going up.

The real kicker about owning a house is that housing prices never go up a nice
steady 2% or 3% per year. They go up 5% one year, then down 5% the next. If
you don't have control over when you sell (loss of a job, etc), that can
really hammer you.

~~~
kjackson2012
There is no rent control on single family homes in SF, regardless of its age.

------
adamkittelson
I'd personally find this more useful if I could start with what I'm paying for
rent and get a result of "If you can buy a similar home for less than $xxx,xxx
then buying is better."

~~~
33W
You can do this by setting all of the sliders except for the home price, then
dialing it in until your rent is shown.

------
al_gore
There is nowhere that I particularly want to live that I could possibly afford
to buy in, though.

~~~
sliverstorm
Broaden your horizons, perhaps? Manhattan & downtown San Francisco are not the
only interesting places in the world.

~~~
TillE
If one of your major criteria is a walkable city (ie, no car required) within
the US, that list is very short and very expensive.

Leaving the country broadens your options considerably, but that also adds its
own complications.

~~~
sliverstorm
If you demand walkable, then yes, you are up a creek. The only way to get
purely walkable, with your grocer, theater, and night club all within a
fifteen minute stroll, is high-density which generally happens in the heart of
large cities, and is indeed expensive.

But how about bicycle-able? My town is about 5 miles square, very bike-able,
and I was able to buy a townhouse at twenty-five.

~~~
bane
Lots of newer suburbs are being designed with high walkability in mind.

My newish suburb is walkable to a movie theater, bike store, huge gym,
swimming pools, Tae Kwon Do school, a couple hair salons and a barber, a full
grocery, a couple clothing stores, about a dozen restaurants from fast food to
high-end dining, a UPS store, an optometrist, a toy store, a ballet school,
two coffee shops, a dry cleaners, a bank, a liquor store, weekly farmer's
market about 3 or 4 miles of landscaped parks, about 20 miles of trail and
_just_ on the edge of walkability is a full 18 hole pro-level golf course.

They're planning on adding more stuff to it as well including a full county
library and some other odds and ends.

There's a nicer development similar to mine about a 15 minute drive that
offers a similar environment.

My friends live in an older neighborhood that's also just a 5 minute walk from
a lively older "main street" style commercial area and likewise get all their
shopping and such done that way. They live in a brand new house, but the town
is a couple hundred years old and historic.

You have to hunt around for them a little, but they're definitely out there.

------
oldspiceman
Rent or buy arguments universally skip what I consider the most important
factor in any major investment decision: freedom. When you buy a house, you
tie up major assets and take on a huge debt load. This provides a massive
constraint on your life. You're less likely to take on a risky job
opportunity, you're less likely to move for a good opportunity, you're less
likely to purchase other things you enjoy, and you put all your eggs in one
basket. On the last point, as Americans should know now, real estate is not a
sure holder of value. You can easily lose 50-100K if you need to sell your
house to move somewhere else but there are no buyers. The flipside of this is
you may sell it for the asking price but need to wait a year to do so.

------
wkd415
Would love to see this for lease or buying cars...

~~~
jonmb
Leasing is almost always more expensive, but there are some benefits. This
page explained it well: [http://www.edmunds.com/car-buying/compare-the-costs-
buying-v...](http://www.edmunds.com/car-buying/compare-the-costs-buying-vs-
leasing-vs-buying-a-used-car.html)

------
snarfy
When interest rates are low, prices are high, and when rates are high, prices
are low. It's fairly straight-forward. Your payment works out about the same.
You should buy when rates are high and prices are low because you can
renegotiate the rate later. You can't renegotiate the price.

Rates are still pretty low now, and thus I continue to rent.

~~~
b_emery
> When interest rates are low, prices are high, and when rates are high,
> prices are low.

The data says otherwise: "“There’s no strong correlation between interest
rates and home prices,” ... The bottom line is other factors (like a stronger
economy) have a bigger impact on house prices than changes in mortgage rates."
[1]

[1] [http://www.calculatedriskblog.com/2013/06/house-prices-
and-m...](http://www.calculatedriskblog.com/2013/06/house-prices-and-mortgage-
rates.html)

------
MrBuddyCasino
Don't forget the human factor! Though theory says buying a house is not always
the best financial move, on average those people are better of when they're
old, because they are forced to live more frugal.

People that rent an apartment or house usually don't have the discipline to
live as frugal as buyers are forced to be.

------
pilom
The New York Times has had this same calculator for years with all the same
options and a much better interface:
[http://www.nytimes.com/interactive/business/buy-rent-
calcula...](http://www.nytimes.com/interactive/business/buy-rent-
calculator.Html)

Why did they make it worse?

~~~
scott_karana
Worse according to who? I can see the appeal of the old version, but I found
the new one more suitable to _my_ needs in every way I can think of.

------
secondForty
Really neat that you've updated this. One issue: The graphs of grey bars on
white background have very little contrast even in different browsers on a
nice monitor. The old version of the calculator has much more color contrast
between the graphs and background and doesn't have this issue.

------
judk
This analysis always misses the most important by far for non-yuppies: the
housing mix for renting vs owning is very different. In my neighborhood, you
can't rent a house, because everything is owner occupied.

Rent vs Own is a boring question. Rent This vs Own That is nearly impossible
to quantify.

------
alexeisadeski3
This version is better:

[http://www.nytimes.com/interactive/business/buy-rent-
calcula...](http://www.nytimes.com/interactive/business/buy-rent-
calculator.html?_r=0)

------
Tycho
zappo had a list of uk cities comparing rent prices with interest only
mortgage price. Some cities eg. Edinburgh showed hardly any difference (for
comparable sized properties).

What I'm not sure about though is how it compares to a traditional principal
and interest mortgage. Obviously your interest payments fall as the mortgage
amortises... So then how does total interest compare to money spent on rent in
that case? That's what most people would be wondering when it comes to
evaluating renting vs buying...

~~~
colinramsay
I think you might mean Zoopla?

[http://www.zoopla.co.uk/press/releases/buying-beats-
renting-...](http://www.zoopla.co.uk/press/releases/buying-beats-renting-in-
aberdeen-but-it-pays-to-rent-in-london/)

~~~
Tycho
Er... Yes.

------
hagope
Has anyone compared this to the Trulia buy versus rent calculator?
[http://www.trulia.com/rent_vs_buy/](http://www.trulia.com/rent_vs_buy/)

------
kerneis
Is this calculator very specific to the American market, or would it also
produce accurate estimates for, e.g., France or the UK?

~~~
russgray
I've just used it for the UK. I ignored the currency and just used exact
numbers (so what I paid for my house in £ is the number I put into the site as
$). Under taxes, I adjusted property tax until the dollar amount was roughly
equivalent to my annual council tax, and adjusted the deductible to 0. Under
closing costs, I included stamp duty as a buying cost. Insurance, maintenance,
etc are all direct conversions.

Leaving most of the expected growth sliders in place, and taking into account
that I've shortened my mortgage with additional payments, it estimated I'd
only be better renting if I could get an equivalent property for about £565.
In reality, the smaller house a few doors up rents for about £1500, and Zoopla
estimates the rental value of my house at £1600. So, either I live in a really
good buying area, or the US calculations don't translate well.

------
smackfu
Another variable that would be useful is property-tax growth rate. Because
sadly that seems to increase pretty constantly.

------
lazyant
We need one like this but Canada; no tax breaks on mortgage interests or
property taxes up here :-(

~~~
refurb
Canada also doesn't have 30-year mortgage terms. The loans are still amortized
over 30 years, but you need to renew the mortgage every 5 years or so.

If you lock in a super low interest rate, you only lock it in for 5 years (10
years are available as well, but you pay a premium in terms of interest rate).

~~~
rahimnathwani
This sounds similar to the mortgage market in the UK. Longer term fixed rates
exist but the rate reflects the yield curve over the fixed period (not just
current spot rates) and there is usually a large redemption penalty. For
example, if you sign up for a 4-year fixed rate deal, there might be a
redemption penalty of 4% if you close it out in year 1, 3% in year 2 etc.

~~~
refurb
Canada has the pre-payment penalties as well. Wouldn't surprise me that
origins of the Canadian system came from the UK.

The US typically _doesn 't_ have pre-payment penalties which is another
benefit for US homeowners since if you get a mortgage rate of 6% and a 30 yr
term and rates drop to 3%, you can simply refinance without pre-payment
penalty and lock in a lower rate. You do need to pay mortgage fee with the
refinance, but banks often have deals where the costs are pretty low.

That said, one has to wonder if the US mortgage rules create perverse
incentives for US homebuyers.

------
basdevries
Tl;dr [http://www.fastask.it/is-it-better-to-buy](http://www.fastask.it/is-it-
better-to-buy)

------
aet
I think the NYT has redone this interactive piece like 50 times now.

~~~
mbostock
Surely you jest! The previous version was four years ago (in 2010) and was
implemented in Flash. Screenshot:

[https://twitter.com/driven_by_data/status/469498632027537408](https://twitter.com/driven_by_data/status/469498632027537408)

~~~
polskibus
Congrats for a article on the NYT! I can't see whether D3 is used or not - can
you shed some light on what did you use?

~~~
cwang912
I think he's the guy that created D3, so I'm guessing that's what he used. (Or
at least I'm pretty sure...)

