Low Home Prices Mean It's Cheaper To Buy Than To Rent In Many Cities
As the national real estate slump deepens, home prices in many cities have crossed a worrisome milestone.
It's cheaper to buy a home than to rent onein 74 percent of the country's largest 50 cities, according to the real estate site Trulia -- findings that confirm the national epidemic of depressed housing prices remains in full swing.
Trulia's research, which compared the median list price and median rent for two-bedroom apartments, condos and townhomes in America's 50 largest cities, found that renting is more expensive than buying in dozens of markets, particularly in Miami and Las Vegas, as well as Mesa, New Mexico, and Arlington, Texas.
In a minority of cities, including New York, Seattle, Kansas City and San Francisco, it's still more expensive to buy than to rent.
A spate of recent studies have shown that home prices remain low throughout the U.S. Earlier this month, the real-estate company Zillow reported that average prices were down 6.2 percent from a year before, and aren't expected to touch bottom until 2012. Data from CoreLogic and Case-Shiller showed similar declines between 2010 and 2011.
Low home prices are seen as delaying a recovery in the housing market, and by extension a turnaround in the broader national economy. When home values are low, homeowner wealth sinks accordingly, and many consumers end up spending less money than they might in a more prosperous market. Meanwhile, prospective homebuyers are more likely to delay a purchase if they believe prices will continue to fall.
On Tuesday, figures from the Commerce Department showed that construction on new homes fell 1.5 percent in July -- not as sharp a decline as economists had expected, but still an indication that the housing sector is far from rehabilitated.
A number of forces stand in the way of a housing recovery, including high unemployment, falling wages and a growing inclination among homeowners to save for retirement, rather than try to upgrade to a better house.
Last month, Morgan Stanley released data showing that the U.S. home-ownership rate is only 59.7 percent if delinquent borrowers are excluded from the count -- an all-time low, and one that may herald a nationwide shift toward becoming a "rentership society" instead of an ownership society, a Morgan Stanley strategist said at the time.