San Joaquin Homes Community Blog

Declining home prices are helping to close the gap between the costs of renting versus the cost of owning a home, making homeownership more appealing and affordable in many metropolitan markets.

· Historically, after-tax mortgage payments have averaged 26 percent more than rent payments, according to Greet Street Advisors. At the peak of the current real estate cycle, mortgage payments reached as high as 66 percent more than rent payments. However, by the end of 2008, mortgage payments averaged just 24 percent more than rent payments, the narrowest gap since 2001.

· In Los Angeles , mortgage payments averaged 60 percent more than rent payments between 1990 and 2008, but have since fallen to only 30 percent more than rent payments.

· Some economists predict mortgage rates could fall to 4.5 percent, which could push mortgage payments to an average of 14 percent more than rent payments, a level last reached in 1998.

· In some markets, well-qualified home buyers are finding that they can pay less for a mortgage payment than they spend on rent.

· Although mortgage payments in some areas may be slightly higher than rent payments, the long-term benefits of homeownership outweigh the costs. Homeowners can deduct the interest they pay annually on their mortgage.

· Additionally, homeowners can build up equity in their homes over the long term. Historically, homeowners who remain in their homes for at least five years have an average annual rate of return of nearly 12 percent.

· Unlike rent payments, a mortgage can be paid off, enabling the homeowner to live in a house free and clear.