In general, the NYT calculator underreports the 'cost to own' when compared to Jlcollins' calculations, making "buying" look more attractive than it might actually be, and not by a small margin.
Since I can't see 'under the hood' of the NYT calculator, it's difficult to know for sure what's causing the difference. But, if one adjusts the default 'home appreciation' & 'rent escalation' downward, the NYT results align more closely with those from Collins. In fact, if those two factors are simply 'zeroed out' (one method of neutralizing the risk that real estate can actually go DOWN in value, and modeling the philosophy that your home is NOT an investment), then the rent option becomes a lot more attractive.
I too would like to see under the hood of the NYT tool. I don't see any obvious bias toward buying in the methodology. But it sure seems to lean that way. Perhaps some of the initial default values are somewhat biased, but of course those can be changed. BTW, your adjustment above does seem to create a bias toward renting:
Zero out rent growth rate... great deal for renters.
Zero out all home appreciation... not so great for buyers.
Presumably you kept inflating maintenance, insurance, and property tax... not so great for buyers; even worse for landlords with flat rent.
That doesn't strike me as realistic. Seems to me that home appreciation, rent growth rate, and inflation should all be about the same in a model like this. Pick a number; I set them all to 2% in the NYT model and left everything else at the default values. Breakeven rent is $1075/mo on a $250K house. Most $250K houses rent for $1700-2200 in the areas we are targeting to downsize.
The most powerful variable seems to be the investment rate of return, which is set to 4% in the NYT default scenario. If I drag that up to 8.9% (historical 60/40 performance), the breakeven rent only goes up to $1333. Still favors buying. And 8.9% is a fairly aggressive assumption.
I then raised the property tax to 2.1% to reflect the higher rates in Texas and lowered the marginal tax rate to 15%, which reduced the tax benefit of buying. Breakeven rent is $1506. Still favors buying.
Doubled the maintenance and renovation from 1% to 2% just for the heck of it. Breakeven rent is $1710. It's finally approaching the low end of our rental range. But as you might have guessed, we don't like most of the $1700/mo options.
Now, all of the above assumes the default mortgage settings. Our initial thinking is to either rent or buy with cash using roughly half the proceeds from the sale of our current home. If I drag the down-payment up to 100% (all cash purchase), the breakeven rent skyrockets to $2344, which finally favors renting, although not by a landslide. This is not surprising since the investment return is still set to 8.9%. If I moderate that to - say - 6.5%, breakeven rent drops to $1929... right in the middle of my market range, so rent vs buy doesn't seem to matter much.
Bottom line, I have messed around with the NYT tool for several days, comparing results to other online models and my own spreadsheets. I've used rental rates and house pricing all over the country from Zillow and several other sources. I've been as realistic and unbiased as possible in the variables and assumptions. The conclusions are decidedly mixed but usually favor buying or doesn't make much difference. Renting is favored when the assumptions include a combination of high investment returns and large down-payments.
This exercise also reminded me that the rent/buy decision and "Should I pay off the mortgage?" are closely related. They're just various points on the housing decision spectrum. One extreme is to pay all cash and have nothing invested in the market. The opposite extreme is to rent and have everything in the market. Somewhere in the middle is to hold a mortgage and have a portion in the market. I've often said that we paid off the mortgage to reduce risk and uncertainty in retirement by reducing our reliance on market performance to pay monthly housing costs. I fully understand that we traded-off some upside potential. For those same reasons, and some other non-financial considerations, we're leaning toward buying instead of renting as we evaluate our downsize options. But maybe we'll take the middle ground this time and hold a small mortgage. Perhaps that's the best way to stake out a neutral position on this question of how much cash to tie up in a house.
