Rent Or Buy? Don't Let NY Times Bias Sway You

New York Times free 'Rent or Buy' calculator for people moving to a new homeThe New York Times offers a free financial calculator that readers can use to answer the question, "Is it better to rent or buy a home?"

Recently, a long-time reader asked my opinion about the tool, and I thought I would share my quick analysis and answers on the Tallahassee Real Estate Blog.

The short answer is that I think it is a great tool, and it factors in many components that will help deliver accurate results. A longer answer, though, would include a warning about the assumptions bias built into the tool. "Assumption bias" in numerical analysis refers to the potential errors or inaccuracies that arise from incorrect, oversimplified, or unverified assumptions used in mathematical models and calculations. This type of bias can significantly impact the outcomes and reliability of a numerical analysis.

Simplified, I think a lot of users of the tools will merely use the New York Times assumptions, and those assumptions will lead to faulty conclusions. To point out the impact these assumptions produce, I've used a real property in Tallahassee (one that I know its current rental rate and current value) where we can do a proper, unbiased evaluation using the New York Times excellent financial calculator.

The Basics

The tool begins by asking the user to compare a purchase price to a rental rate.

A very important factor, but not the only one

The calculation is live and shown in the blue box. If you do not modify the assumptions, renting will save you $133,000 over ten years. But let's examine the assumptions they use for price and rent. 

I can tell you that the price and rent they use are for different properties. In most markets, a $500K home will not rent for $2,000 per month.

Many people who do not work in our industry, but perhaps are mathematically inclined, often compare the median home rent with the median home price thinking that each represents the same type of property. This is incorrect.

The median home in most areas is a single-family home, whereas the median rent in most areas is for an apartment unit. These are not comparable properties. So how does this tool work when we use a rent versus buy analysis on a single property?

Let's look at what happens when we use a property listed on Zillow today.

Unbiased Basics

I've taken a home currently available "for rent" on Zillow, and I know what homes in its neighborhood are worth. The next slide changes the New York Times's assumptions bias to produce a different result.

The New York Times bias has been removed and replaced with factual data

Now that we compare apples to apples, the analysis tool begins from a radically different premise. Initially favoring renting, our consumer's scenario now shifts almost $200,000 in favor of buying. But several more adjustments are needed.

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Biased Purchase Assumptions

The calculator assumes a ten-year duration, a mortgage interest rate of 7.25%, and a 20% down payment.

A very important factor, but not the only one

I have no significant concerns with the first two assumptions, but the third one—assuming a 20% down payment—does not align with my experience. Most individuals comparing renting to owning are often younger, first-time homebuyers without substantial cash reserves.

Unbiased Purchase And Duration Assumptions

What happens when we apply current market data and adjust the down payment to 4%? I originally wanted to use 3.5%, which is accessible to many first-time homebuyers through FHA loans, but the tool only accepts whole numbers.

The New York Times bias has been removed and replaced with factual data

We find that adjusting the down payment slightly strengthens the case for buying. This is an excellent outcome, indicating that the size of a buyer's down payment does not significantly impact the decision between renting and buying.

Market Assumptions

This next set of assumptions centers on predicting future market movements. Here, I find the tool's creators to be either sloppy or intentionally guiding consumers toward a predetermined conclusion.

A very important factor, but not the only one

Anyone with internet access can get historical data for these assumptions, but the tool’s creators used arbitrary numbers.

Unbiased Market Forecast

Without delving deeply into the supply-and-demand imbalance causing soaring home prices and rents, I can tell you that a 3% growth rate on either would be a win for home affordability, but is highly unlikely.

The New York Times bias has been removed and replaced with factual data

Unfortunately, over the past 80 or so years, home prices have grown nationally at a 4.7% rate, while Zillow shows a rental growth rate of 4.9% over the past 11 years. When these numbers are used in the calculator, we see a huge strengthening for buying, from $60K to $153K over the next ten years.

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Taxation's Impact On Housing

The next step in the calculator allows the user to input tax rates to see how taxation impacts the decision to buy or rent.

A very important factor, but not the only one

Instead of using the standard assumptions provided by the calculator, I've tested two extremes—0% and 50% for the marginal tax rate—to assess the impact of taxation on the buy versus rent decision. For someone who pays no federal income tax, the financial advantage of buying decreases slightly, though still heavily in favor of buying.

Extreme Taxation Assumption

So what happens when we calculate the impact of the maximum income tax rate?

The New York Times bias has been removed and replaced with factual data

When the marginal tax rate is increased to 50%, we see the same and opposite result as when we used zero percent. The financial advantage of buying increased slightly. For what its worth (and it's not shown here), switching from a joint return to an individual return moved the needle towards buying.

Closing Costs Bias

Buying a home and selling a home include fees that renters never face, so the calculator includes these in its rent versus buy assessment.

A very important factor, but not the only one

Having brokered for more than 30 years, I can tell you that sellers historically pay 7% to 10% in closing costs in the North Florida area. This is the first time the creator's bias has strengthened the case for buying.

Accurate Closing Costs Estimate

Adjusting seller closing costs 1.5% higher aligns the assumptions with my experience.

The New York Times bias has been removed and replaced with factual data

Higher closing costs affect homeowners but not renters, so while the benefit of buying remains strong, it's marginally reduced compared to earlier estimates with less accurate closing cost assumptions.

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Buy A Home Now Or Wait For 2024?
Are Home Prices Dropping? Will Rising Mortgage Interest Rates Bring Falling Home Prices? If you have been waiting for falling home prices, this is a very important video for you. Do you buy a home now or wait for 2023?
Time-Lapse Tree Removal!
This video captures a detailed time-lapse of the removal of a massive pine tree, a task executed by the skilled Pro Tree Service team over a two-and-a-half-hour period.
What Is A Real Estate Hot Sheet?
What Is A Real Estate Hotsheet? - When agents are new to the real estate industry, they are trained to monitor the " MLS Hot Sheet" every morning in order to stay informed of the inventory changes. So what is a real estate hot sheet, and can non-Realtors get access to it? ?? Link to the current real estate Hot Sheet: https://www.TallahasseeHotSheet.com Up until now, the hot sheet was proprietary information only available to paid members of the MLS. But recognizing that inventory is so low in the Tallahass
Leveraging Seller Financing to Expand Market Opportunities
Owner financing explained, also known as seller financing or seller carryback, is a creative alternative to traditional mortgage financing for real estate.
Ugly Real Estate Listing Pictures | Real Estate Photography Tips
I’ve got some funny, ugly real estate listing pictures to share with you today, along with some simple real estate photography tips. Take a humorous look at some of the WORST pictures I have seen used when marketing a home ... not the way to sell your house!
How To Sell A Home That Needs Repairs
How To Sell A Home That Needs Repairs - If you want to know how to sell a fixer upper house fast, then there are some fundamentals of selling a fixer-upper that you should understand. Ideally, in real estate sales, when selling a home, you should bring a house to market-condition before you sell your house fast in order to attain top dollar during the sale. But ideal situations are not always possible. If you follow the tips and advice in this video, you will know how to sell a fixer-upper house fast and in
First Right Of Refusal Meaning Explained
What is a right of first refusal? What does first right of refusal mean when dealing with a real estate contract? Accepting real estate contingencies without understanding them often causes home sellers problems. I have shared a real-world example of how we handled a first right of refusal real estate contract negotiation, and the decision-making process used to put the home seller in the best situation possible. Pay close attention to this short video and you’ll have a better understanding of the right to
What Does A Transaction Coordinator Do?
When you are selling a home or buying a home, a critical member of your support team is your transaction coordinator. Here's what to expect!
What Is A Seller's Market In Real Estate?
You might have heard that we have a huge seller’s market right now in real estate. Do you know what that means? This real estate frequently asked question comes up from time to time when somebody is buying a home or selling a home. They want to know if its a buyer’s market or a seller’s market. Is now a good time to buy a home in the Tallahassee real estate market? I have prepared this short video to demonstrate the conditions that make this a seller’s market, and then we’ll show you the numbers and how we
How Much Margin For Negotiation Should I Include In My Asking Price?
I was recently asked "How much margin for negotiation should I include in my asking price?" This is a common question from experienced home sellers. They have sold homes in the past and understand the negotiation process involves a game of give and take, so doesn’t it make good sense to start with a little wiggle room in your price so that you can give it to the buyer to secure a sale? Here's what you should know. I explain EXACTLY how much margin for negotiation you should add to the price of your home t
How Long Does It Take To Sell A Home In 2021?
How long does it take a home to sell in 2021? I've been asked this question a lot recently, and it made me realize a full explanation was in order. Why? Because if you understood how to sell a home for top dollar, you would know that it is a trick question. Trust me on this. Invest the few minutes it takes to watch the video and you'll have a better understanding of selling a home than do most people in the real estate industry (and I'll prove it!).
20 Percent Down On A Home?
Learn how to decide how much you should put down on a house. Here is some down payment advice that might help you keep some cash in your pocket.
How Many Times Will A Home Seller Counter Offer?
This real estate frequently asked question is from a recent home buyer. If you are about to buy a home in Tallahassee Florida or beyond and you’re trying to better understand how the real estate negotiation process will work, then understanding how to better control the negotiation is going to keep some of your hard-earned money in your pocket!
Real Estate Is Local - What This Means!
If you plan on buying a home, or selling a home, you’ll want to understand the local nature of real estate and use it to your advantage.
5 Ways To Handle The House In A Divorce
If there is one thing that I see divorcing couples doing wrong more often than not, it is the decision on how to handle the house where the couple has lived. While I am not a lawyer and I'm not dispensing legal advice, take it from somebody who has helped hundreds of divorcing couples, there is a right way (and FOUR wrong ways) to handle the house in a divorce. Tell your attorney that you want to do it right!
What Is A Swimming Pool Worth?
What Is A Swimming Pool Worth? Recently, a customer buying a home asked me a simple question. She inquired “how much does a pool add to the value of a home?” Pretty simple question, right? Well, by the end of this short video, you’ll know the not-so-simple answer (and why this is so important).
How Digital Has Changed How We Sell A Home Today
Time to sell a home? The digital age has had a huge impact on what homeowners must do to get top dollar when selling their home. In this video, Joe Manausa explains why and how things have changed, and then lays out the plan for what home sellers must do.
How To Subscribe To The Joe Manausa Real Estate Channel On YouTube
Have you subscribed to the Joe Manausa Real Estate Channel on YouTube? It's a "must" for people who are planning to sell or buy a home in the near future. Just click subscribe to get started, and the bell icon, so that you never miss anything!
How To Buy Your First Home - Step By Step
How To Buy Your First Home - Step By Step - The home buying process from start to finish. Walkthrough the entire homebuying process, great for first time homebuyers and anyone buying a home this year. This is Home Buying 101.
Get More Money For Your Home
In order to understand how to get more money from a house sale, one must learn about the neighborhood stalker.
Are Wages Keeping Up With Rising Home Prices
Home prices are rising. Mortgage interest rates are rising. Are people earning enough money to buy homes today, or is the home affordability crisis getting worse?
Do's And Don'ts During The Home Loan Process
During the home loan process, you'll want to avoid negatively impacting your loan pre-approval in any way
What Does A Realtor Earn?
In the aftermath of the landmark Burnett v. NAR case, the verdict has sparked a national conversation and a series of legal challenges that question the earnings and practices within the real estate industry.

Maintenance And Fees Assumptions

The final calculation entry is designed to assess the impact of maintenance and fees, which are expenses borne by owners but not by renters.

A very important factor, but not the only one

Using the calculator's assumptions, we find that it strongly endorses buying versus renting, but what about the hidden bias in maintenance and fees.

The Hidden Bias In The Calculator

We find that there are three entries in the Maintenance And Fees segment of the calculator, but this is where practical, on-the-ground experience supersedes purely mathematical modeling.

The New York Times bias has been removed and replaced with factual data

The third entry in the Maintenance and Fees section serves as a catch-all for any utilities paid by the landlord for the tenant. While it initially seems logical to account for utility splits in some leases, I have chosen to zero out this entry, which increases the buying advantage to over $150K.

The model defaults to assuming that the landlord absorbs $100 per month for utilities, which isn't typically the case in practice. From my experience, landlords purchase properties with the intention of covering costs through rent. If a landlord incurs additional costs, such as utilities, these are usually passed on to the tenant. For instance, a property renting for $2,200 per month with no additional owner fees would likely rent for $2,300 if the landlord were paying $100 in utilities.

Now that you have seen my analysis, I encourage you to try the calculator.

The New York Times Rent versus Buy calculator is an indispensable tool for first-time homebuyers. However, it's crucial to scrutinize and adjust the biases inherent in its default assumptions.

If these biases are not addressed, users risk drawing inaccurate conclusions that could significantly affect their financial decisions. Tools like this must either eliminate creator bias by using available data online or adequately educate users to make informed adjustments themselves.

Tell me if you think I've brought bias to the calculator in the comments.

How To EASILY Sell Your House For More Money
The Odd, Counterintuitive Plan - What if I told you that to sell your home for the highest price, you need to price it lower than what you think it's worth?
6 Tips For Selling A Home In 2024
This ain't your grandpa's real estate market, the process for selling a home and getting top dollar have changed so much. It starts with knowing the best way to sell your house. There are home selling tips and tricks you can use.
9 Mistakes to Avoid When Selling Your Home
Selling your home in Tallahassee can be daunting, especially if you're doing it for the first time in more than five years. Do This ...
8 Red Flags Warn Against Unscrupulous Real Estate Agents
When interviewing agents for listing your home, it's important to be cautious of those who might not have your best interests at heart.
6 Real Estate Contract Terms You Should Not Overlook
Buying a house is more than just picking the right place—it's about nailing the details with a real estate contract that can make or break your experience.
What Sellers Need To Know About Robo-Offers In Real Estate
Robo offers in real estate are transforming the traditional home selling process, bringing both opportunities and challenges for sellers.
The Truth About Seller Fatigue: It Costs You 6 Ways
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Watch: This Expert Shares Ironclad Home Selling Plan For FSBOs
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Should you sell your home or rent it out?
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Sellers: Get The Most $ For Your Home
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Your Home Failed To Sell, Now What?
What to do if your home failed to sell. When your "selling a home process" fails, it's time to start thinking about what to do next.
Top 7 Ways To Market Your Home For Sale Using Technology
Technology has opened up a world of possibilities for homeowners looking to market their property and attract potential buyers. In this video, we'll be sharing the top 7 ways to use technology to market your home for sale.
7 Critical Stages In Selling Your Home
The process for selling a home has changed greatly since the world went digital, but now after a historic sellers' market, today's home selling plan requires adjustments compared to the last few years.
How To Sell Your House When You Are In A Hurry
Would you like to know how to sell your home fast without losing out on your hard-earned equity?
I Asked An AI Why Real Estate Agents Ask Sellers For Price Reductions
If your real estate agent has recommended that you reduce your asking price, there could be several reasons for this suggestion.
Pre-Marketing: Win the Home Selling Race
Are you looking to sell your home for the most money possible in today's fast-paced and competitive real estate market? Then you must consider pre-marketing strategies.
12 Home Selling Tips For Retirees - Sell Home In Retirement
If you are retired (or soon to be retired) and plan on selling your home, we've shared 12 tips than many happy retirees relied upon when selling a home.
How To Avoid Common Legal Issues When Buying Or Selling A Home
This video examines the most common real estate law problems and provides guidance on avoiding legal issues when buying or selling a home.
Selling A Home In A Strong Sellers Market | AVOID This MISTAKE!
If you are getting ready to sell a home, you must avoid making a horrible mistake that I'm seeing every single day. As we continue in the midst of the strongest seller's market on record, one might assume that a home seller can do no wrong.
How To Use Price Per Square Foot When Valuing A Home
Price per square foot is a measurement of a home's value, but the price per square foot alone is not an effective way to determine the price a home will sell in today's housing market.
Leveraging Seller Financing to Expand Market Opportunities
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Biggest Change In Selling A Home Since The Printing Press
Here is the biggest change in selling a home since the printing press was invented. Looking for selling a home process? This is the must-do process to sell a home.
How To Sell Your House Without A Real Estate Agent
This for sale by owner video is about empowering you to make informed decisions on what you’ll need to do to save the commission by selling a house without a realtor.
Selling A Home In 2022? The Most Important Question You Must Ask
There is one singular issue that stands above all others when selling a home in a strong sellers' market. In this video, I walk you through the question and best answer to the most important question you should ask when selling a home.
Get More Money For Your Home
In order to understand how to get more money from a house sale, one must learn about the neighborhood stalker.
Real Estate Negotiation Strategies For Each Market Condition
If you mishandle the negotiation on a home, several things will possibly happen, and all of them are bad. First and foremost, you’ll leave money on the table through either the sales price or the terms that are negotiated. Today, buyers are losing out on homes they want to buy and it’s often due to poor positioning in the negotiation. And while we are in the midst of a historic sellers’ market, I’m seeing sellers leave money on the table even when they have multiple offers! #realestatenegotiation #homenegot
Home Selling Tip: Don't Price Your Home On The 9s!
One of the most important steps in your marketing strategy when selling a home is setting the initial asking price for the home. While I have discussed this in previous videos, today I’m going to discuss a technique that I refer to as pricing on the 9s. It works to reduce the buyer pool for the home seller and reduce’s the seller’s chances of getting top dollar for the home. It is a terrible tactic and works against the seller. If you watch this short video, you’ll understand exactly why it hurts home selle
How Much Margin For Negotiation Should I Include In My Asking Price?
I was recently asked "How much margin for negotiation should I include in my asking price?" This is a common question from experienced home sellers. They have sold homes in the past and understand the negotiation process involves a game of give and take, so doesn’t it make good sense to start with a little wiggle room in your price so that you can give it to the buyer to secure a sale? Here's what you should know. I explain EXACTLY how much margin for negotiation you should add to the price of your home t
10 Home Inspection Issues And Tips
Moving from one home to another has enough stress and chaos built into the entire affair, and the home inspection is often the biggest stressor. Here's how to avoid home inspection stress!
Home Staging Advice For Sellers
Do you wonder how to net more money selling your home? This is one of my top home selling tips. Today's video is everything you need to know about staging your home in order to NET the most money from your sale. ?? Here's a link to our FREE Home Sellers Checklist mentioned in the video: https://www.tallahasseechecklist.com/home-seller-checklist-downloadzh61xghm
What Does A Transaction Coordinator Do?
When you are selling a home or buying a home, a critical member of your support team is your transaction coordinator. Here's what to expect!
Real Estate Appraisal Versus Fair Market Value Of A Home?
What is the difference between a real estate appraisal and the fair market value of a home? If there is one practice that confounds both home buyers and home sellers alike it's the fact that the majority of real estate transactions close at the mercy of an appraisal conducted for a purpose that most consumers do not consider. Understanding these differences will save you money when it comes to buying or selling a home, and it will help you appreciate the need and value of a real estate appraisal. But here’s
First Right Of Refusal Meaning Explained
What is a right of first refusal? What does first right of refusal mean when dealing with a real estate contract? Accepting real estate contingencies without understanding them often causes home sellers problems. I have shared a real-world example of how we handled a first right of refusal real estate contract negotiation, and the decision-making process used to put the home seller in the best situation possible. Pay close attention to this short video and you’ll have a better understanding of the right to
Why It's Alway About Supply And Demand In Real Estate
It's all about supply and demand. The real estate supply and demand dynamic tells us everything we need to know to forecast home sales in any given area.
The Truth About A Dubious Real Estate Statistic
They're Lying! When it comes to buying or selling a home, it's important to recognize false or misleading real estate stats (real estate statistics) that can lead to costly mistakes.
How To Sell A Home That Needs Repairs
How To Sell A Home That Needs Repairs - If you want to know how to sell a fixer upper house fast, then there are some fundamentals of selling a fixer-upper that you should understand. Ideally, in real estate sales, when selling a home, you should bring a house to market-condition before you sell your house fast in order to attain top dollar during the sale. But ideal situations are not always possible. If you follow the tips and advice in this video, you will know how to sell a fixer-upper house fast and in
What Is Pre Marketing In Real Estate When Selling A Home?
What is pre-marketing in real estate when selling a home? When your home hits the market and it "goes live," how many buyers will be standing in line to get in? Will it look like an Apple store on the day the new iPhone is released? If not, why not? ... it's all in the video ??????
What Is A Seller's Market In Real Estate?
You might have heard that we have a huge seller’s market right now in real estate. Do you know what that means? This real estate frequently asked question comes up from time to time when somebody is buying a home or selling a home. They want to know if its a buyer’s market or a seller’s market. Is now a good time to buy a home in the Tallahassee real estate market? I have prepared this short video to demonstrate the conditions that make this a seller’s market, and then we’ll show you the numbers and how we
How Digital Has Changed How We Sell A Home Today
Time to sell a home? The digital age has had a huge impact on what homeowners must do to get top dollar when selling their home. In this video, Joe Manausa explains why and how things have changed, and then lays out the plan for what home sellers must do.
5 Ways To Handle The House In A Divorce
If there is one thing that I see divorcing couples doing wrong more often than not, it is the decision on how to handle the house where the couple has lived. While I am not a lawyer and I'm not dispensing legal advice, take it from somebody who has helped hundreds of divorcing couples, there is a right way (and FOUR wrong ways) to handle the house in a divorce. Tell your attorney that you want to do it right!
Four Smart Ways To Use A Real Estate Contract Assignment
Contract assignability allows buyers to give or sell their rights to another buyer, and that creates opportunity. Tune in to discover four reasons to assign a real estate contract (including contract assignment profits)
Ugly Real Estate Listing Pictures | Real Estate Photography Tips
I’ve got some funny, ugly real estate listing pictures to share with you today, along with some simple real estate photography tips. Take a humorous look at some of the WORST pictures I have seen used when marketing a home ... not the way to sell your house!
How Long Does It Take To Sell A Home In 2021?
How long does it take a home to sell in 2021? I've been asked this question a lot recently, and it made me realize a full explanation was in order. Why? Because if you understood how to sell a home for top dollar, you would know that it is a trick question. Trust me on this. Invest the few minutes it takes to watch the video and you'll have a better understanding of selling a home than do most people in the real estate industry (and I'll prove it!).
What Is A Swimming Pool Worth?
What Is A Swimming Pool Worth? Recently, a customer buying a home asked me a simple question. She inquired “how much does a pool add to the value of a home?” Pretty simple question, right? Well, by the end of this short video, you’ll know the not-so-simple answer (and why this is so important).
Real Estate Is Local - What This Means!
If you plan on buying a home, or selling a home, you’ll want to understand the local nature of real estate and use it to your advantage.
How HGTV Is Like Meth For Homebuyers
This is what I have observed regarding the HGTV impact on buying a home and selling a home.

There are a lot of people who endorse Joe for the job of selling your home, including Preston Scott (host of Tallahassee's top daily "Audio Magazine," as well as the thousands of happy customers Joe has helped in the past. Listen why!

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