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Buying is still a better option than renting for many, even though mortgage rates are increasing and housing prices are up, says MarketWatch columnist Peter Morici. Though the tax law changes increased the standard deduction rate and will likely allow less homeowners to claim the mortgage interest deduction, potential buyers now have more money in their paychecks to purchase a home.

Employing a calculator on the Trulia website, Morici examined the buying vs. renting tradeoff for the Washington metro area with a 30-year mortgage, a 4.6% interest rate and 20% down payment. The formula also factors in higher utility costs associated with home ownership, and expected inflation and rent increases. If the home is occupied for at least 4 or 5 years, owning beats renting even without a mortgage interest deduction.

Families could instead invest their down payments in stocks, which at first glance appear to be the better bet. From 2000 to 2017, equities as measured by the S&P 500 SPX, -1.16% were up an average of 5.3% annually, whereas homes appreciated 3.9%. In recent years, appreciation as measured by the S&P Core-Logic Case-Shiller Indexes for top 20 markets and overall nationally indicate an accelerating pace of home appreciation — rising steadily from 4.4% in 2014 to about 6.5% in 2017.

Owning a home in a good neighborhood — not necessarily a rich area but one that is stable and has good employers within commuting distance — has proven one of the most reliable ways for ordinary folks to save and invest.

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