Conventional wisdom dictates that is better to buy than rent. However, in many of the nation’s most expensive markets, like DC, the decision to buy is increasingly more difficult. The metro’s renters are conflicted, on one hand their monthly rent is more than $2,200, yet DC home prices are rising yearly making it ever more challenging to enter the market.
In May, it was 31 percent cheaper to buy than rent nationally, according to Trulia, and It is still cheaper to buy than rent in DC today. With the Federal Reserve threatening another interest rate hike in December, now is the time to buy a home in the DC metro.
Here are six areas in the area where renters can save substantial money by choosing to purchase a home in Washington, DC or Northern Virginia.
Adams Morgan, Washington, DC
It is 22 percent cheaper to buy than rent in this multicultural neighborhood with a diverse restaurant scene for the average foodie. The median sales price for Adams Morgan DC real estate is $560,000 and the median rent is $2,875. Renting costs average $2,745 per month while buying costs average $2,154 per month. Choosing to buy in Adams Morgan would save a renter close to $600 per month.
Mount Pleasant, Washington, DC
Located north of downtown, Mount Pleasant is a short metro ride from the heart of the District. Its nearness to shopping and Rock Creek Park make it one of the District’s most desirable neighborhood. This may account for its lofty median rent of $4,650 per month. Renter’s in this neighborhood should become owners. Despite the median home sale price of $890,000, it is 24 percent cheaper to buy a home in Mount Pleasant. Renters could save $12,000 annually by choosing to own.
Columbia Heights, Washington DC
Just east of Mount Pleasant, Columbia Heights is another one of the District’s more sought-out neighborhoods. Its median rent is $3,625 while the median sales price of homes is $625,000. It is currently, 28 percent cheaper to buy than rent in this District neighborhood. In seven years, a renter could potentially save $60,000 by investing in Columbia Heights real estate now.
Arlington with its many office buildings, is popular with both young adults and families seeking a shorter commute. Those living in Arlington VA spend $3,056 per month renting whereas homeowners only spend $2,265 per month. Making it 26 percent cheaper to buy than rent. Renters could save over $66,000 in a seven-year period by choosing to invest in Arlington real estate.
Falls Church, VA
Falls Church, just west of Arlington, offers a great suburban experience. It is 21 percent cheaper to buy than rent in this Northern Virginia community. The median sales price of a home in Falls Church $540,000. Renters spend $2,650 per month while homeowners spend $2,081 per month.
The choice to buy instead of rent is a slightly tougher choice for residents of McLean, VA. Buying offers a 10 percent advantage to would-be homeowners. In McLean, the cost of rent is $3,296 per month while buying costs are $3,653 per month. The savings per month is $357. After seven years, McLean rents could amass close to a $30,000 nest egg.
The numbers tell a compelling story. DC renters should be encouraged to jump on the home-buying bandwagon. With impending interest rate hikes, the time to start a home search is now. Call us today so you can find a home here and reap the benefits.
Methodology: Rent vs. Buy pricing assumes a 20 percent down payment, a 30-year fixed loan, a 4.35% interest rate, an income tax rate of 25%, and ownership for 7 years.
Katie Bassett is a freelance blogger who covers a wide array of topics within the real estate industry as well as the overall lifestyle for millennials.