Redfin, the real estate website, just published a study of on-campus housing costs for first time, full time undergraduates at public universities and colleges in the US. Tucson, AZ ranked #1 as the best place to buy rather than rent for students attending the University of Arizona (and for their parents or whoever is footing the educational costs for that student.)
Redfin cited the National Center for Educational Statistics as the source of the data used for the study. Redfin compared a list of cities where it has data on condominium prices with 196 public higher education institutions. It then calculated owning costs (average monthly mortgage, 20% down payment, 4% interest rate on a 30 year fixed mortgage, 1.125% annual property taxes and $70.00 annual home insurance. )
Tucson’s median sale price is currently $195,000. The national median sale price is $293,000. In fact, all of the top 15 cities/colleges listed below have median home prices that are below the national average median home price.
Before jumping to buy rather than rent while attending college, consider these three things:
1. College housing is not a long-term investment. Leonard Baron, owner of a real estate buyer help site, pointed out that students/parents tend to keep the property for approximately 5 years. Five years is not long enough to recoup let alone profit from a property. Wendy Cutrufelli, vice president of mortgage banking at Bank of the West, said “This (buying instead of renting) is not a strategy for people who are struggling to fund college…It’s a way to strategically fund college expenses.”
2. It’s all about location. Like all real estate investment, it all depends on the college town. Three years ago, Berkeley, CA was the #1 buyer friendly location for students/parents. Rents topped $3,000 and were rising 20% at year. However, three years ago, home value growth was one half of what it is today.
3. The student (the child) needs to take responsibility. The student/child/owner of the property may have to collect rent from her housemates or renters in addition to mowing the lawn, shoveling the snow, finding the plumber, etc. while studying, interning, working, socializing.