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Why Location Matters If You're on the Fence About Renting vs. Buying Time to buy? Since the housing bubble burst, prices have fallen so much that it is now cheaper to buy than to rent in 98 of the 100 largest U.S. metropolitan areas. That's even true in many pricey real estate markets such as New York, Los Angeles and Boston, according to Trulia's Winter 2012 Rent vs. Buy Index. With this Index, we track whether it is more affordable to rent or to buy a home by looking at asking prices for similar rentals and homes for-sale in similar neighborhoods on Trulia.com, while factoring other costs like taxes, insurance, maintenance and so on.air max tn chaussures Marking a big shift from the boom years, the cost of buying relative to renting has fallen a lot. But just because prices dropped and rents held steady or rose in most places, does that make now a great time to buy? The answer depends on you and on where you live. For starters, deciding whether to rent or buy a place is never easy. Even before looking at how much it's going to cost you where you live, ask yourself this: have you saved enough for a down payment and can you qualify for a mortgage? If not, then owning is probably not an option for you in the first place. Next, ask yourself if you're ready to make a long-term commitment and stay put for at least five years? If not, then you probably should stick to renting because homeownership involves big upfront costs that only make sense if you don't plan on moving again for a while. But if you answer yes to both of these questions, then it's time to look at the numbers.air max tn chaussures Buying a home is more affordable than renting where our price-to-rent ratio is under 15 (see note below tables). The only places where this ratio is above 15 are Honolulu and San Francisco, which means renting might be more affordable than buying there depending on your personal circumstances, such as how much you benefit from the mortgage interest deduction. air max bw classic Top 10 Metros To Buy vs. Rent # U.S. Metro Price:Rent Ratio 1 Detroit, MI 3.7 2 Oklahoma City, OK 4.3 3 Dayton, OH 4.8 4 Warren-Troy-Farmington Hills, MI 5.4 5 Toledo, OH 6.0 6 Grand Rapids, MI 6.1 7 Cleveland, OH 6.2 8 Atlanta, GA 6.5 9 Gary, IN 6.7 10 Memphis, TN-MS-AR 6.8 Top 10 Metros To Rent vs. Buy # U.S. Metro Price:Rent Ratio 1 Honolulu, HI 17.0 2 San Francisco, CA 15.5 3 New York, NY-NJ 14.5 4 San Jose, CA 14.3 5 Orange County, CA 13.5 6 Los Angeles, CA 13.0 7 San Diego, CA 12.7 8 Colorado Springs, CO 12.0 9 Boston, MA 12.0 10 Albuquerque, NM 11.9 NOTE: The lists above rank the major metros where renting a home is most expensive relative to buying, and vice-versa. Price-to-rent ratios that are 15 and under indicate buying is less expensive than renting, while ratios that are 20 or higher indicate renting is less expensive than buying. Between 15 and 20, the rent-versus-buy calculation depends on tax deductions and other personal circumstances. air max bw classic In addition to Honolulu and San Francisco, New York and other California metros have relatively high price-to-rent ratios. At the other extreme, buying is very cheap relative to renting in Detroit and several other markets in the Midwest and South. Why is buying a much better deal in some places than others. Contrary to what you might think, the reason for this actually has little to do with the housing bust. Of the top 10 markets where buying is cheapest relative to renting, NONE are in Florida, Arizona or Nevada, which are the states where home prices fell most after the bubble. In fact, the price-to-rent ratio has much more to do with long-term factors, like economic growth and density. tn requin These long-term factors matter because people will pay more for a home if they expect prices to rise eventually and give them a better return on their long-term investment. Markets where buying is expensive relative to renting tend to have stronger economic growth over many years and little room to build new homes, like Boston and the San Francisco Bay Area: there, people expect home prices to increase over time. Buying is much cheaper than renting in slow-growing places with high vacancy rates and land to spare, like Detroit and Cleveland, where prices are unlikely to improve much in the future. air max tn france So if long-term factors explain why the price-to-rent ratio is higher in some places than others, what does it mean for you if you're on the fence about renting or buying right now? First, if buying in a local market looks like a good deal today, it will be a good deal tomorrow: The rankings won't change much since they're based on long-term factors. San Jose will have much higher price-to-rent ratio than Oklahoma City for years to come. Second, if you plan to stay put in your next home for a long time, think about what might happen to local home prices. Homeownership could turn out to be a much better deal than you think if local home values rise, even if buying looks expensive today. In deciding whether to buy or to rent, always take the long view.
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