WASHINGTON — That rent check you write every month would probably buy you a very nice condo or house.
Apartment rents in Washington, D.C., are among the highest in the nation and, despite the equally high home prices around here, mortgage rates are near record lows.
So, if you just do the math, A plus B equals buy.
Real estate firm Trulia said it is 37.6 percent cheaper to buy than it is to rent in Washington.
“That is based on some assumptions, and the assumptions are that you stay in your home for seven years, you put 20 percent down and you get an interest rate of about 3.7 percent,” Trulia’s chief economist, Ralph McLaughlin, told WTOP.
“Not everyone fits those assumptions, but for those who do, it is far cheaper to buy than to rent in Washington,” he said.
The median price of a home in the Washington metro area is currently about $372,000, Trulia says, and the median apartment rent is about $2,200.
The monthly payment on a $372,000 home with 20 percent down at 3.7 percent would be about $1,370. That leaves plenty of wiggle room for taxes, insurance and maintenance costs.
The world would also have to change dramatically for the equation to change in Washington.
“Interest rates would have to go up to 8.6 percent in order for the financial advantage of owning being about the same as renting. Prices would also have to go up significantly, to a median price in Washington of about $600,000, for the cost of buying to be about the same as renting,” McLaughlin said.
But there are plenty of rational reasons to choose renting over buying, including lifestyle and preferred level of responsibility, not planning to stay put and, based on the math Trulia uses to reach its conclusion, the down payment.
While solid, creditworthy borrowers can get a mortgage for as little as 5 percent down — about $18,600 on Truilia’s theoretical home — a 20 percent down payment on the median price of a home in D.C. would be more than $74,000. That is a pile of cash that most potential young buyers probably do not have.
The down payment may be the No. 1 reason young adults continue to rent.
A recent report from the National Association of Realtors said first-time buyers account for about 30 percent of residential sales right now. Three decades ago, it was over 40 percent.