Here are a few other points that the calculator helps highlight:
1. It’s OK to rent
I know that many people feel guilty about renting — as if it’s an inherently inferior decision that wastes money. That’s wrong (as I explained on a recent “Daily” episode). When house prices are high, as they are in most parts of the U.S., buying often wastes more money because of broker’s fees, mortgage interest, house repairs and other costs of owning.
“At this time, in the majority of circumstances, renting likely makes more economic sense than buying,” said Mark Zandi, the chief economist at Moody’s Analytics, who has advised our work on the calculator over the years. He notes that the typical monthly mortgage is about $2,000 today, more than double what it was when the pandemic hit in early 2020.
Rents have risen, too, but not nearly as much. And many new rental units are coming on the market, which should hold down rents in the near future. The new units include higher-end, multifamily developments, like a 15-story, 1,111-unit complex on South Broad Street in Philadelphia.
2. An overrated deduction
The 2017 tax law reduced the advantages of owning a home in a way that many people have not fully recognized, said my colleague Francesca Paris, who helped build the new calculator. Francesca, who’s a renter, told me that she herself didn’t understand this dynamic until she worked on the calculator.
First, a bit of background: Taxpayers must choose between taking one large deduction, known as the standard deduction, and a series of individual deductions, known as itemized deductions, like the one for mortgage interest. If the standard deduction is more valuable to you, the itemized deductions become irrelevant.
