If you're enamored of the age-old wisdom that renting a home is akin to throwing your money away, think again.
A simple calculation called the price-to-rent ratio can give you an indication of whether it's a better move to rent or buy a home. Trulia, the online real estate data provider, evaluated the price-to-rent ratio in the 50 largest U.S. cities by population. By comparing the average purchase price of a 2-bedroom home -- including mortgage fees and maintenance expenses -- with the average rental price for 2 bedroom apartments, condos, and townhouses, Truilia came up with a handy, back-of-the-envelope way to gauge a local market.
Cities with price-to-rent ratios between 16 and 20 indicate that is cheaper to rent than purchase a home, but certain financial situations may make ownership a viable option. In cities with price-to-rent ratios of 21 and above, it is much more expensive to buy than rent.
"It is not a surprise to see cities like New York and San Francisco on the 'Rent' cities but I was surprised to see areas like Omaha, Oklahoma City and Kansas City on our rental list, "said Pete Flint, co-founder and CEO of Trulia. "We're not suggesting that it's unwise to buy in these areas though -- just that it's significantly more expensive than renting."
"In many of these cities, even though home buying is much more costly than renting, prices are still much lower than they have been in a long, long time," Flint added.
Check out Truila's list of U.S. cities in which it's cheaper to rent than buy a home: