Report: Buying Still Cheaper Than Renting

October 7, 2013

Rent VS Buy 

According to Trulia’s new Summer 2013 “Rent vs. Buy Report,” buying a home is more affordable than renting in America’s 100 largest metropolitan areas. The study compared 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. The homes selected for the study were listed for sale and for rent on Trulia between June 1 and August 31, 2013.

In the last year, the mortgage rate for a 30-year fixed-rate loan rose from 3.75 percent to 4.80 percent, raising the cost of buying a home relative to renting. In fact, homeownership is now 35 percent cheaper than renting nationally, down from 45 percent less expensive one year ago. Yet despite their current upward climb, mortgage rates will not tip the
housing market nationally in favor of renting over buying until rates hit 10.5 percent nationally, given current home prices and rents.

While homeownership is still more affordable than renting in all of the 100 largest metros, rising mortgage rates may soon turn the tide. Buying a home is now less than 10 percent cheaper than renting in San Jose and San Francisco– a dramatic shift from the previous 31 percent and 28 percent less expensive a year ago, respectively. If rates keep rising and current rents and prices remain flat, San Jose will become the first housing market to tip in favor of renting once mortgage rates hit 5.2 percent.

Source: Trulia

 

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