March 3rd, 2014
A recent report by real estate online marketplace Trulia found that buying a home is still more affordable than renting.
According to the Winter 2014 Rent vs. Buy Report – which looks a 100 metro areas across the U.S. – renting is 38 percent more expensive than owning. In the year prior, rental costs were 44 percent higher than homeownership costs. Low mortgage rates have kept price appreciation from impeding consumers from buying homes. Furthermore, rising rent prices, especially in metropolitan areas like San Francisco and Seattle, have also been a factor driving consumers toward homeownership.
Although the national data shows conditions favor buying a home over renting, the local numbers have more variation as a result of differences between average rent and home prices. In Dallas, for example, it is 41 percent cheaper to buy rather than rent with a 4.5 percent 30-year fixed-rate home loan, a 25 percent itemized tax deduction and a if buyer stays for seven years. Under the same conditions, it is 24 percent cheaper to buy in Los Angeles.
Trulia anticipates that renting may become more affordable than buying in some metro areas as home prices continue to appreciate throughout 2014. Additionally, gradual tapering of the Federal Reserve’s quantitative easing program is expected to lead to a rise in mortgage rates, further tipping the scale in favor of renting.