Buy vs. Rent Fail

September 21, 2009

This is funny.

Check out Ginnie Mae’s Buy vs. Rent Calculator. Apparently the government doesn’t think house prices fall…


A better calculator is available from NYT. Assume property prices and rents stay flat (i.e. grow 0%), it’s still more advantageous to rent … here in NYC especially.


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Posted by Unconventional « Life in Peru | Report as abusive

Got to make sure its apples to apples though. If you’re comparing the rent of an 800 sq ft apt to a 2,000 sq ft house, I’m not sure what that tells you, other than paying for more space is more expensive.

Of course, if you only need 800 sp ft…

Posted by Andrew | Report as abusive

But home prices are on the up and up, according to the National Association of Realtors and the National Association of Home Builders…oh wait, hang on, nevermind.

Posted by Mortgage Truth | Report as abusive

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Posted by Advice for buying complete set of golf clubs? | Golf Cart Covers | Report as abusive

[…] Ginnie Mae (Freddie and Fannie’s lesser-known-but-just-as-large cousin) thinks home prices can’t fall. Subscribe to blog feed. « Another one from […]

Posted by The Governmentt is Lying? No! | | Report as abusive

Well it won’t let you enter a negative number but I did reduce the down payment to 3% ( hey this is a GNMA/FHA deal) and the appreciation rate to zero and it said I was better off ‘renting’ by $2800

Posted by sangellone | Report as abusive

Not only does the program reject negative price changes, the error message contains a misspelling.

Posted by Clutch J | Report as abusive

The average payment on your house changes based on the yearly appreciation. I think they are assuming this is inflation.

Seems like this calculator is a little screwy.


Posted by oliverks | Report as abusive

I think housing market has still to fall because America is losing on Jobs and interest rates have gone higher. There are very little chances of housing reviving. On top of it, the government efforts are not helping as well.
Recently read an article on a similar premise. g-news-articles.php

Posted by James Smith | Report as abusive

The Gov. has also forgotten the 15k down payment the renter will invest over the 30 years (at 5% this will double twice (60k), over 30 years)

Posted by Numbers | Report as abusive

They can’t even spell “positive” correctly! Probably coded in Hyderabad…

Posted by kitsunuki | Report as abusive

ya and figure a minimum of 1000 bucks a year for maintenance on the purchased home

Posted by Steve | Report as abusive

They’ve ‘fixed’ the calculator so that it cannot accept the minus symbol!

Posted by AL | Report as abusive

It completely ignores the opportunity cost of the downpayment. These guys haven’t taken econ 101.

Posted by Cato | Report as abusive

I’m not ‘possitive’ they fixed it so you can’t enter the minus symbol. I tried pasting -1 into it and got the same error message, complete with ‘possitive’ misspelled.

Posted by Eeek | Report as abusive

Well, first things first, yes, they spelled positive wrong on the pop up message.

However, that’s just a little thing. Somehow they’ve calculated your tax benefit without ever asking for your income. Furthermore, I’d be willing to bet that the tax savings calculation is done incorrectly.

To wit: All taxpayers are allowed to take the standard deduction and an exemption on themselves, at minimum. You cannot take these if you itemize, which is what you must do to deduct your interest expense and property taxes. However, if you just take the taxes and interest paid, then multiply that by a 28% tax rate (.28) and claim that you have saved that much, you are incorrect. You must subtract the amount of the deductions you would have otherwise received. In fact you might only be breaking even, or worse.

Furthermore, as stated in this article, it does not allow for the concept that home prices or rents might go down. In fact, this ridiculous “calculator” forces your rent to go up each year. Many of us haven’t seen a rent increase in years. I haven’t in the 7 years since I sold my house. I have friends whose rents are being lowered.

As if all that weren’t enough, there is no allocation for the extensive cost of repairs to a home or the difference between renter’s insurance and homeowner’s insurance.

Finally, the larger percentage of down payment you put down, the greater the savings this calculator assumes for buying. This is not exactly logical, unless they assume you would otherwise waste or lose the money. Instead, you are tying up your money that you might have been able to make more with by investing it elsewhere. As referenced previously, this is known as opportunity cost.

Could this calculator be any more worthless or biased? You’d think the current U.S. Congress came up with it.

Posted by Brian Gray | Report as abusive

The average payment on your house changes based on the yearly appreciation. I think they are assuming this is inflation. s/property-buying-amp-selling-a

Posted by Robin Smith | Report as abusive

most people assumes its inflation…

rent office space

Posted by Carlo | Report as abusive