By Jim Droz
Home prices have taken such a beating and demand for rental units has increased so much that it’s now cheaper to buy a two-bedroom home than to rent one in most major U.S. cities.
According to online real estate site Trulia, buying was cheaper than renting in 74 percent of the country’s 50 largest cities in July. In just 12 percent of the cities, including New York, Seattle and San Francisco, renting was cheaper. In the remaining 14 percent of cities, renting was less expensive but close to the cost of buying.
In addition to a continuing decline in home prices, low interest rates have added a lot of weight to the buy side of the scale. Add in the tax perks of home ownership and for those who can afford it and can actually qualify for a loan, it certainly is a buyer’s market.
Top buyer’s markets
Las Vegas offered the most compelling buy-side math, Trulia’s survey found, with prices there plunging more than 59 percent from their August 2006 peak. The median price of a two-bedroom, two-bath condo or townhouse is about $60,000, a ratio of only six times the median annual rent of a similar rental apartment, which is $9,700.
Monthly mortgage payments on a median-priced Las Vegas condo would come to $256 on a 30-year, 5-percent interest loan. Even factoring in property taxes and common charges of roughly $300 a month, the monthly amount is still lower than the $810 in monthly rent they would pay on a similar place.
Detroit, according to Trulia, is another metro area where buying is better. The median price for a condo or townhouse is about seven times annual rent. Home prices in Mesa, Ariz., and Fresno, Calif., also clock in at seven times rent.