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Trulia Reports Buying A Home In Top 100 Major Metros Is Cheaper Than Renting Despite Rising Home Prices

Trulia (NYSE: TRLA) today released its Winter 2013 Rent vs. Buy Report, which provides the inside scoop on whether buying a home is more affordable than renting in America’s 100 largest metropolitan areas. Looking at homes for sale and for rent on Trulia between December 1, 2012, and February 28, 2013, this study compares the average cost of renting and owning for all homes on the market in a metro area, factoring in all cost components including transaction costs, taxes, and opportunity costs. For the full report and methodology, see here.

Low Mortgage Rates Keep Homeownership Affordable Nationwide

Asking home prices rose 7.0 percent year-over-year (Y-o-Y) nationally in February, outpacing rents, which rose 3.2 percent Y-o-Y, according to the Trulia Price and Rent Monitors. However, today’s low mortgage rates, at 3.5 percent at the end of February 1, have kept the cost of homeownership from rising much. In fact, buying a home is 44 percent cheaper than renting nationwide – down just slightly from 46 percent in 2012. Even in each of the 100 largest metros, buying is more affordable than renting, though how much more affordable homeownership is ranges significantly – from 70 percent cheaper to buy than rent in Detroit, to only 19 percent cheaper in San Francisco.

Top 5 Metros Where Buying a Home is a No-Brainer
#   U.S. Metro  

Cost of Buying vs. Renting (%), 2013

 

Cost of Buying vs. Renting (%), 2012

1

Detroit, MI

-70% -69%
2

Dayton, OH

-63% -70%
3

Gary, IN

-63% -60%
4

Cleveland, OH

-63% -57%
5

Warren- Troy- Farmington Hills, MI

-63% -64%
Top 5 Metros Where Buying a Home is a Tougher Call
#   U.S. Metro  

Cost of Buying vs. Renting (%), 2013

 

Cost of Buying vs. Renting (%), 2012

1

San Francisco, CA

-19% -35%
2

Honolulu, HI

-23% -26%
3

San Jose, CA

-24% -38%
4

New York, NY-NJ

-26% -26%
5

Albany, NY

-30% -34%

Note: Negative numbers indicate that buying costs less than renting. Trulia’s rent vs. buy calculation assumes a 3.5% 30-year fixed-rate mortgage, 20% down, itemizing tax deductions at the 25% bracket, and 7 years in the home.

Even If You Can’t Get the Best Mortgage Rates, Buying Still Beats Renting

With today’s low mortgage rates, homeownership is 44 percent cheaper than renting – but only homebuyers with the best credit history will qualify for today’s lowest mortgage rate. Getting a higher rate, though, does not mean homeownership is completely out of reach. Even with a 5.5 percent mortgage rate, buying a home is still cheaper than renting in almost every market. Only in San Francisco does homeownership become slightly more expensive than renting at the higher rate.

How Mortgage Rates Affect the Cost of Buying Relative to Renting
U.S. Metro 3.5% 4.5% 5.5%

San Francisco, CA

-19% -9% 2%

New York, NY-NJ

-26% -17% -9%

Orange County, CA

-32% -24% -16%

San Diego, CA

-33% -26% -18%

Los Angeles, CA

-35% -28% -20%

Sacramento, CA

-37% -31% -24%

Boston, MA

-40% -33% -26%

Oakland, CA

-40% -34% -26%

Washington, DC-VA-MD-WV

-41% -35% -28%

Portland, OR-WA

-42% -36% -29%

Seattle, WA

-42% -36% -30%

Miami, FL

-43% -38% -32%

Riverside- San Bernardino, CA

-44% -38% -32%

Las Vegas, NV

-44% -39% -34%

Phoenix, AZ

-46% -40% -34%

Dallas, TX

-47% -43% -38%

Philadelphia, PA

-49% -44% -39%

Denver, CO

-53% -47% -41%

Chicago, IL

-50% -46% -42%

Houston, TX

-51% -47% -43%

Minneapolis- St. Paul, MN-WI

-53% -48% -44%

Tampa- St. Petersburg, FL

-55% -51% -47%

Baltimore, MD

-57% -52% -48%

Atlanta, GA

-56% -52% -48%

St. Louis, MO-IL

-58% -54% -50%

NOTE: Negative numbers indicate that buying costs less than renting. These scenarios assume a 30-year fixed-rate mortgage, 20% down, itemizing tax deductions at the 25% bracket, and 7 years in the home.

PRE-APPROVED QUOTES

  • “Although buying a home is still cheaper than renting, the gap is closing,” said Jed Kolko, Trulia’s Chief Economist. “In 2013, home prices should rise faster than rents, and mortgage rates are likely to rise in the next year as the economy improves. By next year, buying could be more expensive than renting in some housing markets, even for people with the best credit.”
  • “People who didn’t buy a home last year may have missed the bottom of the market, but they haven’t completely missed the boat,” said Jed Kolko, Trulia’s Chief Economist. “Buying remains cheaper than renting in all 100 large metros. Even buyers who can’t get today’s lowest mortgage rates will still find that buying makes more financial sense than renting in nearly all local markets – so long as they can get a mortgage in the first place.”

MULTIMEDIA

  • To view an interactive map illustrating how mortgage rates, tax deductions, and number of years in the home can affect the rent vs. buy decision, click here.
  • To view a full list the rent vs. buy cost considerations for the 100 largest U.S. metros, click here.

ABOUT TRULIA, INC.

Trulia (NYSE: TRLA) gives home buyers, sellers, owners, and renters the inside scoop  on properties, places, and real estate professionals. Trulia has unique info on the areas people want to live that can't be found anywhere else: users can learn about agents, neighborhoods, schools,  crime, commute times, and even ask the  local community questionsReal estate professionals use Trulia to connect with millions of transaction-ready buyers and sellers each month via our hyper-local advertising services, social recommendations, and top-rated  mobile real estate apps. Trulia is headquartered in downtown San Francisco. Trulia is a registered trademark of Trulia, Inc.

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