Buying a Home is Cheaper than Renting
Fri Mar 30, 2012 on Blog
Despite some of the lowest home prices we’ve seen in quite some time, many are still opting to rent.
There seems to be some reluctance on the part of many people to commit to purchasing a home. It’s understandable that no one is rushing to join the 11 million people living in underwater homes.
But if you think you’re saving money by renting, think again.
The flip side is as home prices are starting to stabilize, rents are continuing to rise.
It’s to the point now where in the overwhelming majority of US cities, it’s actually cheaper to buy than to rent, according to Trulia.com.
Trulia just released its Spring 2012 Rent Vs Buy Index, which is based on asking prices for rental properties and homes for sale in similar neighborhoods
Out of the 100 largest metropolitan areas, the only cities where rental and home prices are level were Honolulu and San Francisco. There isn’t a single market in the country where it’s cheaper to rent.
In fact Florida offers some of the best values in the country, by Trulia’s numbers. Lakeland-Winter Haven landed just outside Trulia’s Top 10 to buy a home, with a Rent-To-Buy Index of 7.1. West Palm Beach and Tampa-St. Petersburg were not far behind, with indexes of 7.3 and 7.4 respectively.
Fort Lauderdale and Orlando are also markets with a ranking under 8.
According to Trulia, an index of between 0-15 means its more affordable to buy if you plan to live in your home for at least five years. An index under 10 means it’s still more affordable to buy, even if you’re not planning on staying in your home for that long.
The highest ranking market, Honolulu had a 17. Even in expensive markets like New York and Los Angeles, buying is cheaper.
So what does this mean? You’ll end up spending more now if you wait for the housing market to recover.
It’s a vicious cycle, as people have less money to set aside for a home purchase, yet will end up spending more in rent than they would for a mortgage
“Rising rents create a dilemma for people who can’t afford to buy yet,” said Jed Kolko, Trulia’s chief economist. “Rising rents make it harder for people to save for a down payment, which is the biggest barrier to buying a home that aspiring homeowners face.”