Last week, Inman examined how condominium price growth has slowed throughout the U.S., even as house prices have grown faster.
While the reasons can differ by location, affordability looms large nationwide.
In the large metros where condos are concentrated, the estimated monthly cost of buying a typical condo rose about twice as quickly as apartment rents since mid-2022, according to an Inman analysis of data from Zillow, census surveys and other sources documented below. And while most of that gain was due to mortgage rates, a significant chunk of it was due to disproportionate increases in condo fees and insurance costs that renters haven’t had to worry about.
Inman also created a new “buy vs. rent” calculator for its real estate agent community and their clients to use. The calculator’s backbone is the same as the one that informs this analysis. Here’s some of what that analysis reveals.
- Despite the opportunity to build equity with a purchase, a consumer buying a condo to live in for 11 years came out ahead of renting an apartment in only 35 of 79 comparable metros.
- Buying a house, on the other hand, beats renting one after 11 years in 90 of 97 metros.
But that’s only under a very specific set of assumptions — namely, that if consumers opt for renting instead, they’ll save the money that would have gone toward the down payment in a low-yield account, and spend the cost difference from the cheaper residence instead of saving or investing it.
These assumptions are more or less consistent with how many Americans handle finances around housing, surveys consistently show.
But they don’t apply to all U.S. consumers. And for those who take a different path, the financial implications can be dramatically different.
- For example, if the consumer invests the cost savings from renting at 7 percent annual returns, buying a condo would beat renting an apartment after 11 years in only 5 of 79 metros.
- On the other hand, if a consumer who doesn’t invest spends 15 years in the home before selling instead, they’d be financially better off buying a condo than renting in 61 of 79 markets.
Scenarios like this are why Inman developed the new calculator below. The tool is intended to help U.S. consumers and their real estate agents make sense of the competing considerations and how they affect a buyer or renter’s long-term financial health — whether looking at houses, condos or apartments in their market.
In the calculator, each field is pre-populated with a best estimate based on publicly available sources for property prices and costs in the selected market.
These values are based on real data, but they’re only a starting point.
Plug in more specific values where you know them, such as the price of a specific listing you or a client are interested in, or the cost of a quality alternative rental.
At the end, the calculator estimates the initial recurring monthly costs of each option, as well as the total net cost over a period of time. Net cost is the total amount you would pay out, offset by what you’d gain in the form of home equity, investment returns or freed-up money to save or spend.
Try to be realistic about the assumptions you select.
Are you buying a home you plan to live in for decades? Or is there a serious chance you might have to move in four years?
When you get a pay increase, do you consistently invest a portion of it, or do you enjoy the extra money up front? (The calculator treats freed-up spending as a benefit that the consumer enjoys paying less for housing. But it doesn’t compound or grow like an investment might.)
Every scenario, no matter how detailed, can be linked and shared with a real estate agent or a client. Users can also print a PDF summary.
Try it out for yourself, and explore what affordability looks like in dozens of markets.
