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A new report from Trulia, Rent vs. Buy: Haunted by Prices, Not Rates, reveals that in the 100 largest American metros, buying a home remains more affordable than renting. Trulia reports that on a national basis, buying a home is 37.7 percent cheaper than renting. But just how significant is the financial advantage between buying a home and renting?
Findings:
- Nationally, the benefits of lower mortgage rates have been mostly offset by higher prices. For households who move every seven years and can afford to put 20% down, it’s 37.7% cheaper to buy this year. This up just slightly compared to 37.2% last year.
- Buying is cheaper than renting in each of the 100 largest metros. The range is from over 50% cheaper in Miami and Fort Lauderdale, Fla., to under 20% in Honolulu and San Francisco.
- Homebuyers should be more concerned about rising prices than rising mortgage rates. Rates would have to more than double to wipe out the financial advantage of buying, whereas prices would only need to increase by 67%. In San Jose, Calif., prices would only need to go up by 24% for the cost of buying to be the same as renting, whereas rates would have to jump by 45% – or 1.6 points – for buying to cost the same as renting.
Rising home prices, which have increased by 5.9 percent since 2015, may prevent some renters from making the leap into homeownership, and even though mortgage rates have dropped significantly over the past year (from 3.9 percent to 3.7 percent), the transition to homeownership remains difficult.
The decision between buying and renting is easiest to make if you live in the South, which houses eight of the 10 metros that “offer the largest financial advantage of homeownership.” The top 10 list is rounded out by Philadelphia, PA and Syracuse, NY.
Top 10 U.S. Metros/Cost of Buying vs. Renting (%):
- Miami, FL/-53.2%
- West Palm Beach, FL/-53.2%
- Houston, TX/-52.9%
- Fort Lauderdale, FL/-52.9%
- Charleston, SC/-52.5%
- Baton Rouge, LA/-51.7%
- New Orleans, LA/-51.2%
- Syracuse, NY/-51%
- Philadelphia, PA/-50.8%
- Columbia, SC/-50.6%
These figures contrast starkly with other cities like Honolulu, HI, Milwaukee, WI and San Francisco, CA where the cost of buying vs. renting is -17.4 percent, -19.6 percent and -25.9 percent respectively. Regardless of the percentage points, buying continues being more affordable than renting; even though rising home prices make it easier for renters to accept their skyrocketing rents, the right time for you to buy make be just around the corner.