With more than ¼ of all adult millennials in Philadelphia living with their parents due to the cost of rent, many ask the question: “Will I EVER be able to afford to buy a house?” Thankfully, the answer is YES. Although rent may seem unaffordable, buying a home in Philly can actually be a cheaper option. Nationwide, about 21% of millennials are living at home, while the number in Philly is at 27% and growing – probably due to the ever-increasing cost of renting in a desirable city neighborhood.
According to Zillow, Philadelphia renters spend 29% of their income on rent – and that’s only what they pay their landlords. The cost of electricity, renters’ insurance, parking, and internet can inch that number up quite a bit.
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Philadelphians who have a mortgage, though? They only pay, in average, 14% of the income towards their housing.
Given that the average income in Philadelphia is $64,046, that means renters spend, on average, more than $1500 per month just for base rent. Home owners are spending about half, or around $750 per month on their mortgages. Renters would need a substantial increase in their income in order to not feel the pinch of high rent costs!
Additional expenses
Aside from the cost of a rental, as mentioned, there are other things you’ll be paying for above and beyond that $1500. Most apartments, for example, don’t include utilities. Water, gas, sewer, trash and recycling, and even heating oil may be your responsibility, adding up to several hundred dollars per month to your living costs. Forget about being able to afford cable!
Renters’ insurance is also a very important cost. Many people forego it because it’s something they see as an unnecessary expense, but in the case of fire, flood, or theft, it’s important to have a way to replace your belongings. Tons of younger adults don’t realize they probably have thousands or tens of thousands of dollars worth of belongings when their phone, laptop or tablet, clothes, shoes, furniture, and basic kitchen equipment are all accounted for.
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When you own a home, you’ll also have many of these expenses, of course. All utilities, homeowners’ insurance (which covers your structure and property as well as belongings), plus interest on your mortgage, property taxes, and even possibly PMI – a type of mortgage insurance that kicks in when you put down less than 20% equity. However, with mortgage prices trending so low, these extra costs may be more than made up for when you compare the total cost of renting to the total cost of buying.
Property taxes in Philadelphia are a tricky thing, and can vary widely from neighborhood to neighborhood and property to property. There are 
When buying a house, you may also have more costs off the bat because you’ll need to pay closing costs. Closing costs cover everything from the down payment itself to the home inspection to the mortgage initiation fee. First time buyers might be able to get sellers to include some money for closing costs in the final sale price of the home, though, reducing these out of pocket costs to almost zero.
Don’t forget the costs of furnishing, either! When you rent your first apartment, you might need to buy even the most basic supplies. A bed, a couch, a desk, a table, even kitchen items like plates, a few pans, some knives and silverware, can really add up.
The benefits of owning over renting
There are conveniences to renting, of course. When your roof starts to leak, you can call your landlord to take care of it. While you don’t need to pay property taxes directly, landlords do roll those costs, along with many others and usually a monthly profit, into your rent payment. You can also move on a whim – assuming you aren’t locked into a difficult-to-break least and have the money for additional start-up costs and movers at your new place.
Your start-up costs can be lower, as well, since you usually only need a few months of rent to move into a new place, including first, last, and deposit. When buying a home, closing costs and your down payment can equal anywhere from 5% to 25% of your home’s price.
But really, the biggest benefit to owning a home is EQUITY. You can be confident that much of the money you pay every month is essentially paying yourself. As you pay down your mortgage, you’re building value in your home. When you go to sell, you basically get that money back – and then some if the value of your home appreciates and you sell in great seller’s market. When you’re renting, you can kiss all of your hard-earned money goodbye, never to be seen again.
Another benefit of owning over renting is customization. How many apartments won’t let you even paint the walls or own a dog, let alone refinish a bathroom? Not only do you get access to a larger variety of properties when you buy – from studio condos to modern townhomes to single-family properties – but you can make all the changes you want. And an investment in your home can often be an investment in your home’s value, too. Even if your landlord will let you install hardwood floors, you’ll just have to leave them there when you move!
Almost convinced you should buy?
Go ahead – live with mom for another year while you save money, but consider buying instead of renting when it’s time to move out!
When you’re ready to buy your first home, please contact me to discuss your options. And remember, friends don’t let friends buy a home without Agent Lady!
About Agent Lady: Cherise Wynne is a leading real estate agent in Philadelphia, helping home buyers and sellers navigate the City of Brotherly Love, with a special focus on first time home buyers. To chat about getting started with your first time home buying experience, click here.
