It is cheaper to buy a home than to rent one in 39 of the nation’s 50 largest cities, according to a quarterly report released today by real estate search and marketing site Trulia.
Trulia’s rent vs. buy index compared the median list price with the median rent on two-bedroom apartments, condominiums and townhomes listed on Trulia.com as of April 1, 2011, in the 50 most populous cities in the U.S. While 72 percent of the cities favored buying in the previous quarter’s report, 78 percent favored buying in this latest report.
“With home prices nearing a double dip and more foreclosures expected to flood the housing market over the next two years, the decision between renting and buying a home across most of the country has clearly moved in favor of buying,” said Ken Shuman, Trulia’s spokesperson, in a statement.
“As we head into the summer buying season, those looking to buy a home should be encouraged by improvements in the market and feel optimistic about their chances of finding an affordable home — much more so than in previous years.”
A price-to-rent ratio of 1 to 15 means that it’s much cheaper to buy than to rent in a particular city. A ratio between 16 and 20 means that it’s more expensive to rent than to buy, but, depending on the family’s situation, buying could “make financial sense,” the site said. Any ratio above 20 indicates that owning is much more costly than renting in a city.
Top 10 cities to buy vs. rent:
Rank City State Price-to-rent ratio 1 Las Vegas Nev. 6 2 Phoenix Ariz. 7 3 Arlington Texas 7 4 Fresno Calif. 8 5 Miami Fla. 8 6 Mesa Ariz. 8 7 Jacksonville Fla. 9 8 Sacramento Calif. 9 9 Detroit Mich. 10 10 Omaha Neb. 10
Most of the cities considered saw their price-to-rent ratios fall quarter-to-quarter. Fresno, Calif.; Omaha, Neb.; San Jose, Calif.; Seattle; Cleveland; and Detroit saw the biggest drops.
Rank City State Q2 2011 Q1 2011 % change 1 Fresno CA 8 11 -30% 2 Omaha NE 10 13 -25% 3 San Jose CA 12 15 -21% 4 Seattle WA 19 24 -20% 5 Cleveland OH 14 17 -15% 6 Detroit MI 10 12 -15%
Coastal cities dominated among those where renting is cheaper than buying, but consumers will have to decide if buying makes financial sense.
Rank City State Price-to-rent ratio 40 Oakland Calif. 16 41 Oklahoma City Okla. 16 42 Portland Ore. 18 43 San Francisco Calif. 19 44 Boston Mass. 19 45 Seattle Wash. 19 46 Memphis Tenn. 20 47 Los Angeles Calif. 20
The index considers the total cost of homeownership compared to the total cost of renting. Calculations for the total cost of homeownership include mortgage principal and interest, property taxes, hazard insurance, closing costs at time of purchase, homeowners association dues, and private mortgage insurance. The homeownership cost calculation also includes tax advantages from mortgage interest, property tax and closing-cost deductions.
Calculations for total rental cost include rent and renters insurance.
The total cost of homeownership was highest, compared to the cost to rent, in New York; Fort Worth, Texas; and Kansas City, Mo.
Top 10 cities to rent vs. buy:
Rank City State Price-to-rent Ratio 50 New York N.Y. 39 49 Fort Worth Texas 30 48 Kansas City Mo. 22 46 Memphis Tenn. 20 47 Los Angeles Calif. 20 43 San Francisco Calif. 19 44 Boston Mass. 19 45 Seattle Wash. 19 42 Portland Ore. 18 41 Oklahoma City Okla. 16