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Buying may be cheaper than renting

Allen Norwood
Allen Norwood writes on Home design, do-it-yourself and real estate for The Charlotte Observer. His column appears each Saturday.

Two weeks ago, I shared comments from top housing economists who said American homeowners – and buyers and sellers – don’t really need to worry that rising mortgage interest rates will send the housing market spiraling into the tank.

Then, along came the Federal Reserve’s Ben Bernanke. He set the whole world to fretting about higher interest rates, including those for mortgages, when he said the Fed will consider backing off its stimulus measures.

So, should we worry now?

Well, worriers worry.

But it’s a good opportunity to revisit and expand on what Jed Kolko, Trulia’s top economist, said at a convention in Atlanta. And it turns out that Kolko was citing research that includes specific good news about Charlotte. Trulia even offers an online interactive tool that lets you plug in tax situations that resemble your own and estimate the effect of rising rates here.

In Atlanta, Kolko was joined on a panel by Lawrence Yun, chief economist for the National Association of Realtors, and Mark Fleming, top economist for CoreLogic, the real estate data firm.

Kolko said that when mortgage rates are at 3.5 percent, as they were not too long ago, buying is 44 percent cheaper than renting on average. At 5.5 percent, buying is 33 percent cheaper than renting. Where’s the tipping point? On average nationally, it’s more than 11 percent.

It’s different depending on the area of the country, but rates would have to get into double digits.

Kolko was sharing highlights from a rent-vs.-buy report that you can find on the Trulia Trends section of the company’s website. The report includes an interactive map with more specific information about top markets across the country, including Charlotte.

What about the Queen City?

The map shows that, at 3.5 percent, buying in Charlotte is 52 percent cheaper than renting. That’s well above the national average Kolko cited. At 4.5 percent, buying here is 47 percent cheaper than renting. When mortgage rates hit 5.5 percent, according to Trulia’s research, buying in Charlotte will still be 42 percent cheaper than renting.

Those Charlotte figures assume that you’re in the 25 percent tax bracket and will be in the home seven years, but you can change both those assumptions. You can plug in figures that more closely match your own situation. (Here’s a hint: More good news.)

You’ll find the report and the interactive map at

Play with the map. Maybe Trulia’s reassuring take on the effect of rising interest rates will calm your nerves some. It’s way better than constantly checking the balance of your 401(k).

Special to the Observer:
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