In Portland, Buying a Home is Cheaper Than Renting
Max Radi and his partner Seth are not your typical homeowners. As recent college graduates with entry-level jobs, they were just looking for a decent place to rent near downtown Portland one year ago.
“Then we started thinking about how we could get a decent return on our investment,” Max says. He looked at the numbers and realized that the cost was about the same to rent as to buy a condo in downtown Portland.
“When you’re renting, that’s money you’re losing,” he says. When the two expanded their home buying search to condos outside the downtown neighborhood, the options were greater and the savings even more substantial.
Seth had no credit, but Max’s credit was good enough to qualify for a mortgage with a low down payment. Between the two of them, with a little help from their parents, they had the down payment together in a few months. Their Portland real estate agent helped them find a condo in the Sylvan-Highlands neighborhood, about 15 minutes from downtown by bus, and they moved in last July.
Max and Seth are not alone. With the cost of the average home in Portland still low and rents higher than ever, more and more people are seeing the advantages of becoming homeowners.
The real estate website Trulia.com generates a “rent vs. buy” index for every major city in the U.S. The lower the number, the greater the value of buying a home versus renting. Last year, Portland was a 12.2 on the index, and this spring it gets an 11, meaning that buying a home in Portland is now significantly more affordable than renting.
Why exactly is that? It has to do with the housing supply-and-demand factors already mentioned, plus the fact that mortgage loan interest is tax deductible. Also, when it does come time to move, homeowners get back the money they invested in the home, while renters get nothing but the happy memories.
There are other advantages to home ownership. There’s no risk of having to move unexpectedly, say when the landlord decides to sell. Mortgage payments are fixed for 15 or 30 years, while rents tend to go up (3% a year on average). Then there are the non-monetary benefits.
“It just feels different owning your own place,” says Max. “It’s nice being able to make decisions about the house.” Not only that, but now that Seth is making mortgage payments, he’s finally able to build a good credit history.
Of course, there are catches. A home investment is something that pays off only after a couple of years, so if you’re planning on relocating again, renting is still the best bet. Finding a home to buy can be a lot more complicated than finding a rental, and there is more research to do.
“Be sure to use a good realtor,” says Max. A qualified Portland Realtor can help first-time home buyers jump the hurdles and avoid the pitfalls, making the leap from the treadmill of rent to the security of home ownership a successful one.April 13, 2012