Top 10 places where buying is cheaper than renting

(MoneyWatch) Despite skyrocketing home prices and rising interest rates, owning a home is still cheaper than renting across the country.

That's not just based on the average price of a rental unit versus the price of owning a home anywhere within the same city. Trulia calculated the costs of similar properties in similar neighborhoods to get an apples-to-apples comparison; then mixed in the start-up costs including maintenance, insurance and taxes; calculated the future costs; and then added in one-time costs like closing, down payments and security deposits to come up with its rent versus buying equation.

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The biggest factor affecting that equation right now is rising mortgage rates, according to Trulia.

In places like San Jose, mortgage rates only have to inch past 5.2 percent to make renting cheaper than buying -- a scenario that is more than likely to happen sometime next year. But in parts of Michigan, Florida and Ohio, interest rates would have to hit 17 percent or higher before rents are cheaper than mortgage payments.

The last time the mortgage market saw interest rates that high was in the early 1980s, and interest rates have never been that high before or since.

So it's likely that unless there's substantial growth in home prices accompanied by a huge drop in rental prices, some places will always be cheaper to buy--way cheaper. If you're looking to buy in a place where owning is half as expensive as renting, try these 10 spots.

Top 10 places where buying is cheaper than renting

10. Akron, Ohio

Home prices in Akron largely weathered the housing crisis and remain just as cheap as they were back in 2000, which is to say that they haven't grown much either in a decade. Currently it is 51 percent cheaper to buy a home than rent one. And all things equal--if home and rental prices continue along their trend lines--it would take an 18.2 percent interest rate on a mortgage to make renting cheaper than buying.

Top 10 places where buying is cheaper than renting

9. West Palm Beach, Fla.

Florida's real estate market is still struggling to right itself, and West Palm Beach is no different. Home prices there are still depressed, so buying here is 52 percent cheaper than renting. Mortgage rates would have to hit 17.1 percent to switch that.

Top 10 places where buying is cheaper than renting

8. Grand Rapids, Mich.

The strong rental market in Grand Rapids may be the reason why it's so much cheaper to buy than to rent in the city. Home prices are almost back to normal in Grand Rapids, so it may not be long before the gap narrows between renting and buying. Right now, it's 52 percent cheaper to buy than to rent and it will take a 17.7 percent interest rate to tip that.

Top 10 places where buying is cheaper than renting

7. Dayton, Ohio

Ohio has the most cities on this list, mostly because home prices have been depressed in the state well before the housing crisis. Prices jumped recently, thanks to limited inventory, but buying is still 53 percent cheaper than renting here. Mortgage rates would have to hit 19.5 percent to switch around that equation.

Top 10 places where buying is cheaper than renting

6. Warren-Troy-Farmington Hills, Mich.

Warren, Troy and Farmington Hills are dominant suburbs northwest of Detroit. While the areas haven't been devastated the way Detroit has, they have been affected by Detroit's struggles. With a smaller rental market available in the area than in the nearby city, homes in the three suburbs are 53 percent cheaper than renting and it would take an 18.4 percent interest rate to make buying more expensive.

Top 10 places where buying is cheaper than renting

5. Kansas City, Mo.

Home prices in Kansas City really didn't fall much during the recession--in fact they grew. But so did prices in the rental market. Although prices are fairly cheap for both when compared to national averages, buying beats renting by a longshot in the city. It's 53 percent cheaper to buy than to rent and it would take an 18 percent interest rate to turn that around.

Top 10 places where buying is cheaper than renting

4. Cleveland, Ohio

Home prices in Ohio's second-largest city dropped about 50 percent during the recession from their 2005 peak, and although they recovered somewhat since then, the trajectory hasn't been very straight. The number of homes sold has also dropped, and that seems nowhere near recovery. It is 54 percent cheaper to buy than to rent in Cleveland and it'll take a 20 percent interest rate to shift that.

Top 10 places where buying is cheaper than renting

3. Memphis, Tenn.

Hit hard during the recession, Memphis is still working through a lot of foreclosures, which are really dragging down prices in the city. It's 55 percent cheaper to buy than to rent here, and it would take a 19 percent interest rate to make renting cheaper than buying.

Top 10 places where buying is cheaper than renting

2. Gary, Ind.

The small city just over the border from Chicago has struggled economically for years, even before the recession hit. The city is in such dire straits that it recently rolled out a program to sell foreclosed and abandoned homes to the right buyer for just $1 in order to relieve the blight of vacant homes. It's 58 percent cheaper to buy than to rent here and it would take a 20.6 percent interest rate to switch that.

Top 10 places where buying is cheaper than renting

1. Detroit

Detroit is bankrupt thanks in part to a population that has been fleeing its city boundaries since the 1970s. That leaves a lot of empty homes and not a lot of buyers. With or without the housing crash, Detroit's home prices would be some of the lowest in the country. The rental market hasn't been affected in the same way, which is why buying is 65 percent cheaper than renting. The interest rate tipping point is an unheard-of 32.8 percent.