Pitt one of two places it's cheaper to buy than rent (Pittsburgh: to rent, mortgage)

[pman]

Yahoo! Finance - Business Finance, Stock Market, Quotes, News (http://customsites.yahoo.com/financiallyfit/finance/article-107589-2419-0-where-its-cheaper-to-buy-than-rent - broken link)

the other is detroit. on the face of it one might assume the two are similar but that's not true at all. Detroit faces a severe lack of demand and people probably find it "safer" to rent than commit to living there. of course, these calculations are never compeltely accurate since they can't possibly know what will happen to future home prices. is it because some places, like downtown, have artificially high rents due to lack of supply? any ideas?

[babble]

We also factored in tax rebates assuming an annual income tax rate of 30%. The ownership costs were calculated using a 30-year fixed mortgage with an interest rate of 5.5% and maintenance fees and property taxes were assumed to be about 3%.

From what I have read, property taxes in Pittsburgh are very high. I don't think that was factored in the calculation.

[pman]

Originally Posted by babble

We also factored in tax rebates assuming an annual income tax rate of 30%. The ownership costs were calculated using a 30-year fixed mortgage with an interest rate of 5.5% and maintenance fees and property taxes were assumed to be about 3%.

From what I have read, property taxes in Pittsburgh are very high. I don't think that was factored in the calculation.

that's a fairly high tax rate. that also points out the regressive nature of the MID. I'd bet if you're in the 25% bracket it's cheaper to rent.

[BrianTH]

We discussed this a bit before in another thread. One general thing they did was basically ignore the opportunity cost of any capital investment in a typical home-buying scenario, and instead just looked at monthly cash flows. Specifically with respect to Pittsburgh, they also probably underestimated the total maintenance and property tax expenditures.