Rent vs. Buy or Buy vs. Rent?

Today Trulia announced America’s Top 10 Cities to Buy vs. Rent and the Top 10 Cities to Rent vs Buy. Trulia calculated the price-to-rent ratio using the average list price compared with average rent on 2 bedroom apartments, condos and townhomes listed on Trulia.com. To create the list, Trulia analyzed the largest 50 cities in America, by population.

Top 10 Cities to Buy vs. Rent City

Price-to-Rent Ratio

1.Minneapolis, Minnesota
8
2.Arlington, Texas
8
3.Miami, Florida
8
4.Fresno, California
8
5.San Antonio, Texas
8
6.Mesa, Arizona
9
7.Jacksonville, Florida
9
8.Phoenix, Arizona
10
9.El Paso, Texas
10
10.Las Vegas, Nevada
11


“At the peak of the real estate bubble, cities like Miami, Phoenix and Las Vegas were not affordable for many. Now the opposite is true,” said Pete Flint, co-founder and CEO of Trulia. “Home sellers in these hard hit areas are forced to lower their prices to compete with all the foreclosures on the market. As a result , these unattainable markets are so affordable it makes better financial sense to buy than rent.”


Top 10 Cities to Rent vs. Buy City

Price-to-Rent Ratio

1.New York, New York
33
2.Omaha, Nebraska
26
3.Seattle, Washington
25
4.Portland, Oregon
22
5.San Francisco, California
22
6.Oklahoma City, Oklahoma
21
7.Kansas City, Missouri
20
8.San Diego, California
20
9.Cleveland, Ohio
20
10.Dallas, Texas
19


“It is not a surprise to see cities like New York and San Francisco on the ‘Rent’ cities but I was surprised to see areas like Omaha, Oklahoma City and Kansas City on our rental list, “said Flint “We’re not suggesting that it’s unwise to buy in these areas, though - just that it’s significantly more expensive than renting. In many of these cities, even though home buying is much more costly than renting, prices are still much lower than they have been in a long, long time.”


Price-to-Rent Ratio of 1-15: It is much less expensive to own than to rent a home in this city Price-to-Rent Ratio of 16-20: It is more expensive to own a home in this city are The total costs of ownership of a home in this city are greater than the costs of renting, but it might still make financial sense depending on the situation. Price-to-Rent Ratio of 21+: The total costs of owning a home in this city are much greater than the costs of renting.


Definitions: Total costs of home ownership include mortgage principal and interest, property taxes, hazard insurance, closing costs at time of purchase and ongoing HOA dues and private mortgage insurance, where applicable. Total costs of homeownership include an offset for the tax advantages of homeownership, including mortgage interest, property tax and closing cost deductions.

Market Update through April-May 2010

The real estate market in Northern Virginia has rapidly expanded this spring with most areas selling about twice as many homes in April as were sold in February. This is partly due to the spring...The real estate market in Northern Virginia has rapidly expanded this spring with most areas selling about twice as many homes in April as were sold in February. This is partly due to the spring selling season that happens annually, but it was a larger jump in sales this year than we see most years. This was mainly due to the combination of the April 30 tax credit deadline that many buyers were trying to meet and the low interest rates that were available.I believe we would have had a strong spring without the tax credits. We will see the May numbers when they come out to see how much the tax credits were effecting the number of sales. May numbers almost surely will not be as high as April. There were clearly some buyers that would have taken there time and wrote offers in May that hurriedly went under contract at the end of April. But I also think there were buyers in May that did not qualify for the tax credit (or thought the market was overpriced due to it) that waited until the deadline had passed before negotiating their purchases. People who have bought in the last year and a half are above water and people who bought the several years before that have lost money on their homes. As prices rise and time passes, more and more owners will have the ability to sell without losing money, which will encourage more inventory on the market. Currently, most owners who bought or cashed out on a refinance from 2004-2008 and want to sell now, either need the cash to cover their losses or are short selling their houses. Many people see neither of those as good options, so are staying in their homes to wait out the market.