If you think rent is too expensive where you live, you might want to look into homeownership. A new report by online real estate company Trulia, which analyzes data in 100 metro areas across the U.S., found that it’s 38 percent cheaper to buy a home than rent one.
Despite increasing home prices, low mortgage rates have made homeownership the more affordable option in each of the top 100 metropolitan areas. In fact, mortgage rates would need to rise to 10.6 percent for renting to become cheaper than buying nationally — and rates haven’t been that high since 1989.
“Buying remains cheaper than renting across the country even after 2013′s big price rebound,” said Jed Kolko, Trulia’s chief economist. “Mortgage rates are still near historic lows, despite rising a point in the past year, and would be the envy of time travelers from the 1980s, 1990s, or 2000s. Even in markets like San Francisco where home prices are high relative to paychecks, buying costs less than renting for people who stay seven years and itemize their deductions.”
The study found that overall, homebuyers who stay in their homes for seven years will save 38 percent over renting. Last year the number was 44 percent cheaper.
According to the Trulia press release:
The rent-versus-buy math differs across metros mostly because each local market has its own normal level of prices and rents, but also because property taxes and home price appreciation differ in individual markets as well. Taking all these factors into account, buying ranges from just 5 percent cheaper than renting in Honolulu to 66 percent cheaper than renting in Detroit. Generally, buying is a tougher call relative to renting in California and New York, while the gap is largest in the Midwest and South.
Best bets for homeownership:
- Detroit — Buying is 66 percent cheaper than renting.
- Gary, Ind. – 61 percent cheaper.
- Birmingham, Ala. – 58 percent cheaper.
- Toledo, Ohio – 58 percent cheaper.
- Kansas City, Mo. – 58 percent cheaper.
The advantages aren’t so obvious here:
- Honolulu – 5 percent cheaper to buy than rent.
- San Jose, Calif. – 9 percent cheaper.
- San Francisco – 13 percent cheaper.
- Orange County, Calif. – 21 percent cheaper.
- New York City – 22 percent cheaper.
Trulia said one of the biggest factors affecting the buy vs. rent decision is what will happen to home prices after you buy.
Curious to see what buying vs. renting looks like in your region? Check out Trulia’s interactive Rent vs. Buy Map and Rent vs. Buy Calculator, which allow you to input personalized information and assumptions and scenarios, so you can gauge whether renting or buying is cheaper.
This article was originally published on MoneyTalksNews.com as 'Homeownership Is Cheaper Than Renting in Many Cities'.
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