March 27th, 2013
Housing affordability is at an all-time high, which may prompt many renters to become buyers in the future.
The Winter 2013 Rent vs. Buy Report released by Trulia reveals that purchasing a home is more affordable than renting in America’s 100 largest metropolitan areas, despite an increase in home prices. The study factored in total costs – including transaction costs, taxes, and opportunity costs – to make this determination. Trulia’s findings indicate that buying a home is 44 percent cheaper than renting on a nationwide basis – down from 46 percent in 2012.
“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.”
The top cities in which buying is significantly more affordable than renting include Detroit and Dayton, Ohio, where housing affordability exceeds renting affordability at 70 and 63 percent, respectively. In other metros, the call is tougher to make. For example, in San Francisco, it is only 19 percent more affordable to buy versus rent.
Potential buyers should work closely with a mortgage consultant to determine the interest rates they qualify for in order to make a more calculated decision about affordability.