Survey: Buying a Home Beats Renting in Most Markets
Home values continue to take it on the chin. The latest update of the S&P/Case-Shiller home price index for 20 large metro areas says values fell 3.3 percent over the 12 months through February. Not great for homeowners to be sure, but soft home prices are in fact creating an interesting conundrum for renters. New data from real estate research firm Trulia says buying rather than renting, is now a far better financial deal in about 80 percent of the largest cities.
There's no guarantee when housing will finally bottom, but four plus years into the reset, we're much closer to the end than the beginning. If you've got your eye on ownership and live in an area where renting isn't a roaring deal, maybe it's time to start sniffing around the open houses. That is, if you think you'll be able to scale today's tougher mortgage lending standards.
Where Buying is the Best Deal
Trulia calculates a rent-vs.-buy ratio by comparing the median list price of homes in the 50 largest cities with the median rent for two-bedroom apartments, condos, and town homes. A ratio below 15 means buying is much less expensive than renting, after accounting for the total costs of home ownership. According to Trulia's second-quarter data run, buying is the better financial deal than renting in 39 of the 50 cities. No surprise, markets with a large foreclosure inventory (and thus soft prices) such as Las Vegas, Phoenix, and Miami top the list of cities where buying beats renting by the widest margin.
The Top 10 Cities Where Owning Trumps Renting
1. Las Vegas (rent-vs.-buy ratio = 6)
2. Phoenix (7)
3. Arlington, TX (7)
4. Fresno (8)
5. Miami (8)
6. Mesa, AZ (8)
7. Jacksonville, FL (9
8. Sacramento (9)
9. Detroit (10)
10 . Omaha 10
Looking at the other end of the spectrum, Trulia considers any score above 21 a screaming signal that renting is a better deal. A score between 16-20 is a squishier call where other considerations besides straight-up financial ratios can tip you one way or the other.
The Top 10 Cities Where Renting Can Make More Sense
1. New York City (rent-vs-buy ratio=39)
2. Fort Worth, TX (30)
3. Kansas City (22)
4. Los Angeles (20)
5. Memphis (20)
6. Seattle (19)
7. Boston (19)
8. San Francisco (19
9. Portland, OR (18)
10. Oklahoma City (16)
You can check out rent and list-price data for all 50 markets by clicking through to the Trulia map, below.
Rents on the Rise
It's not just slumping home prices that are skewing the rent-vs-buy calculus toward buying in most markets. Landlords are increasingly able to raise rents in more markets, making renting less of a good financial deal. According to Reis Inc, which tracks rental data across 82 markets, rates rose in the first quarter in 79 of those cities.
Below are Reis forecasts of where rental increases will be highest and lowest for the entire year:
Where Rents Will Rise the Most in 2011
1. San Jose 8.1 percent
2. Washington, D.C. 6.9
3. Suburban Virginia 6.4
4. Seattle 6.3
5. New York City 6.1
6. Oakland, CA 6.0
7. Fort Worth 6.0
8. Orange Cty, CA 5.6
9. Houston 5.4
10. Ft. Lauderdale 5.4
If you happen to live in New York City, Seattle, or Fort Worth take note. While Trulia data suggest renting has the upper hand right now, the Reis data implies that you still might need to steel yourself for some stiff rental increases.
Where Rents Will Rise the Least in 2011
1. Las Vegas 1.2 percent
2. Orlando 1.4
3. Wichita 1.6
4. Syracuse 1.6
5. Jacksonville 1.8
6. Los Angeles 1.9
7. Lexington, KY 2.2
8. Columbus, OH 2.3
9. New Haven, CT 2.3
10. Pittsburgh 2.3
While Las Vegas ranks as the best market in terms of buy v. rent, it's not as if renters have to worry about rising rents this year.
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