Buying cheaper than renting in nearly 100 major U.S. markets: Trulia
Buying is more affordable than renting in 98 out of the nation's 100 largest metropolitan areas — even in New York, Los Angeles and Boston, according to real estate company Trulia's rent vs. buy index. The index is based on asking prices for rental units and homes for sale on the company's website between Dec. 1, 2011, and Feb. 29. “As rents rise and prices stagnate, homeownership is becoming even more affordable, but rising rents create a dilemma for people who can’t afford to buy yet,” says 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.” Homeowners are choosing, or being forced, to rent rather than buy even though the latter is cheaper in key markets Trulia reviewed. But as they turn to renting, the influx of demand squeezes the nation's rental supply, pushing monthly rents higher. The nation's median rent stands at $712 per month — well above the average monthly mortgage cost of $647, Paul Dales, senior economist at Capital Economics, recently found. He estimated decreased vacancies in the home-rental market will push average rental rates up as much as 5% by early 2013, compared to 2.4% in January. As a consequence of less willingness and ability to buy a home, households in rentals will rise by at least 850,000 a year over the next few years, Dales said. He expects rents to rise at an annual rate of 3% this year and remain at that level in 2013. "Assuming that the economic recovery gains firmer footing, in future years there is scope for rents to rise by around 4% a year," Dales said. Only in Honolulu and San Francisco is renting often a better deal than buying. However, Trulia points out that buying a home in these markets might make sense for people who plan to stay in their next home for at least five years and can benefit from the mortgage-interest tax deduction. “Metros where homeownership is expensive tend to have stronger long-term economic growth and little room to build new homes, like Boston and the San Francisco Bay Area, where people expect home prices to increase over time," Kolko says. "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," he says.
Top 10 metros in which to buy versus renting, according to Trulia:
The National Association of Realtors is predicting existing-home sales will jump 7 to 10 percent in 2012 to the highest level in five years, based on an "uneven but higher sales pattern" so far this year. Pending home sales fell a seasonally adjusted 0.5 percent from January to February, which was up 9.2 percent from the same time a year ago, NAR said today in releasing its latest Pending Home Sales Index. Last week, NAR reported a similar trend for existing-home sales, which were down 0.9 percent from January to February, but up 8.8 percent from a year ago. The pending sales data released today provides a glimpse into more recent trends, because it tracks homes that were under contract in February -- deals that will in most cases be finalized within one or two months. NAR said 31 percent of Realtors experienced contract failures in February, in some cases because buyers' mortgage applications were rejected or because appraisals came in below the negotiated price. In the Northeast, NAR's index slipped a seasonally adjusted 0.6 percent from January but was up 18.4 percent from a year ago. The Midwest saw a month-over-month gain of 6.5 percent and a 19 percent gain from a year ago. Pending home sales fell 3 percent in the South from January to February, but were up 7.8 percent from a year ago. In the West, the index declined 2.6 percent from January to February and was 1.8 percent below the index rating in February 2011. In its latest economic forecast, NAR predicts existing-home sales will total 4.65 million in 2012, up 9.1 percent from last year. That forecast assumes that the U.S. economy will grow at a 2.3 percent annual rate and add 2.7 million jobs this year
Top 10 metros in which to buy versus renting, according to Trulia:
NAR: 2012 home sales will be strongest in past 5 years
February pending sales up 9.2% from year ago
By Inman News, Monday, March 26, 2012.
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