Buying A Home Cheaper Than Renting In 98 Percent Of Housing Markets

Despite very low prices, many Americans can't or don't want to buy houses.

Instead we're paying ever-higher rents and watching as housing prices fall further and further.

In nearly every city in the country, it is now cheaper to buy a home than to rent one, according to new data from the real estate website Trulia.

In 98 of the 100 largest metropolitan areas in the U.S., homeownership trumps renting, according to Trulia. The two holdouts? Honolulu and San Francisco.

There is a vicious cycle at work, said Jed Kolko, chief economist of Trulia, in a statement. "Rising rents make it harder for people to save for a down payment, which is the biggest barrier to buying a home that aspiring homeowners face," he said.

Trulia calculated a house price-to-rent ratio by comparing asking sales prices to rental prices for similar units in similar neighborhoods.

Though in recent days, some have expressed optimism that the housing market is making a comeback, real estate is still suffering from the fallout of the housing crash. Many Americans can't sell their homes and buy new ones because they're underwater on their mortgages. More than 20 percent of mortgage-holders now owe more on their loans than their home is worth.

And while mortgage rates are at historic lows, not many can qualify for a loan. Credit ratings took a hit in the recession and lending standards are still much stricter than they were during the bubble when anyone with a pulse got a mortgage.

Are you considering buying a home or waiting out the housing market? Email us your story at [e-mail].

Financial distress also is keeping many first-time buyers out of the market. Three in ten young adults between the ages of 25 and 34 have moved back in with their parents in recent years, according to the Pew Research Center. High unemployment and stagnant wages are partly to blame. The average inflation-adjusted hourly wage for male college graduates between ages 23 and 29 has plunged 11 percent over the past decade, and it has fallen 7.6 percent for female college graduates between ages 23 and 29, according to The Wall Street Journal.

The decreased demand for new homes is partly attributable to the declining number of people forming new families. It is hard to have kids when you're struggling to get by. The number of newly married adults fell six percent between 2008 and 2010, and barely half of all Americans -- a record low -- are married, according to the Pew Research Center.

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Comments

[spdrcrgol]

03:34 PM on 10/13/2012

Even if you purchase a house, your just renting it until you pay it off ( usually 30 years) Just miss a few payments and you will see who really owns the home. Homes are no longer investments almost like cars, there is no guaranteed resale amount you will recieve. Maybe you win maybe you lose.With the thousands and thousands of upfront money you must pony up its a gamble at best. There are a lot less costs involved in renting and if the neighborhood goes to pot you can move without having to lose a dime.

[James F Barry]

12:16 AM on 03/24/2012

All this is fine, but if you can't get a loan its just talk.....

[DenverWilliam]

02:48 PM on 03/23/2012

Add up a lifetime of rent.....could have been your retirement money

[charlcreat]

05:50 PM on 03/23/2012

You said it. I have my eyes on a nice shipping crate that could really be cozy with some wallpaper and a couple of beanbag chairs. But my kids said they wouldn't come visit so...

[Ainsi sera groigne qui]

02:53 PM on 03/24/2012

Actually the idea is to take the difference between what one would have spent on owning (down payment, maintainence,etc...) and put it into investments and or savings.

There are several excellent studies that prove on average the stock market out performs owning a home as an investment.

Of course this is all relative to where one lives and under what conditions. Someone living in a below market rent "controlled" NYC apartment would pay more, much more for the same sized unit per month in terms of mortgage and other housing payments versus their rent

Many of the persons who run into trouble at retirement age be they renters or home owners usually have little or no savings/investments to fall back upon. Those with homes assumed or assume they can or could use their property as back up, and we're seeing today how that is working out for some. Many renters OTOH fail or failed to plan for increases (which often can be substantial) in housing costs that would eat into their savings.

[lofttypeofaview]

04:51 PM on 03/24/2012

Many people lost everything to the stock market, it's a lottery ticket; don't invest what you can't afford to lose and expect to lose, so that you'll invest less. Also don't reinvest your gains, so that if the stock does fail, at least you didn't lose your profit.

[JC Boomer]

02:46 PM on 03/23/2012

I own a condo in the NYC area and my mortgage, taxes and maintenance are less than what I would be paying in rent for a similar place. Plus I get a nice tax deduction at tax time which lowers my monthly cost even more. When I bought my place a friend rented an apt and was paying less than what I was paying, now he is paying more in rent than my monthly payments and has nothing to show for all his rent payments.

[Ainsi sera groigne qui]

02:57 PM on 03/24/2012

Far as NYC is concerned the only persons that should be renting are mainly those in below market rent controlled apartments and or those not planning on staying very long.

Market rate apartments in NYC,especially much of Manhattan and other better areas simply fluctuate too much to be depended upon as "safe". Also the only persons truly protected from being chucked out of their apartments by landlord's whims are RS ones. Not far from us a small carriage house was purchased recently and all four tenants simply given three months to find new digs.

[spdrcrgol]

03:44 PM on 10/13/2012

Just a counterpoint, I'm in FL and can rent a sweet 3/2/2 for $1000 a month with no property taxes, no repair bills, no garbage fees, no homeowners insurance and no HOA fees. At the end of 30 years(average mortgage) I am way ahead on "something to show for it" when you add up all that I didnt pay vs what a homeowner must pay. And forgot, all the money spent on closing for the home would be saved too.

[ChezMJ]

10:46 AM on 03/23/2012

This doesn't seem right to me. For example, maybe the monthly payment on a home is less than the rent but doesn't take into account property tax, insurance & maintenance, which is considerable. Manhattan cannot possibly be cheaper to own but as part of NYC, it is averaged in with Queens. Because most homes in Manhattan are not free standing but condos, there is also a large common area fee to be paid every month. There are tax advantages to owning but there are fees going in & going out & taking a new job in another part of the country is an expensive proposition. Renting is better for many based on family & job considerations.

[charlcreat]

05:46 PM on 03/23/2012

In some areas, absolutely. But in the Southeast, around Atlanta, Greenville(which about to boom with BMW expansion and other new businesses), Birmingham, Charlotte, you can get some great values in fairly new homes or recent remodels. I have a co-worker who is looking to buy an updated, remodeled, house for half of what it was 8 years ago and his payments will the same as I'm renting an apartment for. Just depends on where you are and what you need. But at my age, I'm thinking retire and live in one until I can't anymore. But mowing the lawn sucks, so maybe I'll go with artificial turf and old tires painted white with wildfowers( weeds) growing out of them...

[ChezMJ]

08:30 PM on 03/23/2012

Well, I'll be looking for your house & I bet I'll be able to spot it! ;-)

Happy mow-free retirement to you. Happy trails!

[Ainsi sera groigne qui]

03:12 PM on 03/24/2012

Average price for a Manhattan apartment runs about 1.2 million. Things get cheaper in the less desired areas such as upper Manahttan (Inwood, Washington Heights, etc..) where one can find things from about 300K to 400K.

http://www.trulia.com/home_prices/New_York/New_York-heat_map/

The average housing prices for all of NYC runs from about 500K to 700K depending upon type (home, condo, co-op, etc...)

http://www.deptofnumbers.com/nyc/home-sales/new-york-city/

By some sources it is still cheaper to rent in Manhattan then own: http://www.nydailynews.com/life-style/real-estate/buy-time-mortgages-cheaper-rent-areas-article-1.1048901?localLinksEnabled=false

However if one considers purchasing a home in the broughs such as Queens or Staten Island then yes as things stand now it is cheaper to purchase than rent. *See above.*

Several factors come into play here. Cost of housing, size of down payment (if any), mortgage rates and closing costs, income and "cost of use" of the funds one is tying up in purchasing that could be used for something else.

[goairforce]

09:37 AM on 03/23/2012

There are pluses and minuses for the renter and home owner on each side of the fence.
My oldest kid just bought a home -- a really nice one -- after living in a rental ranch that was built in the 50's. His mortgage payment will be lower than his rent was. The advantages to him are huge. He got such a good price on the house, he's already got equity. He gets to make changes that fit his life and his needs. OTH, my youngest can't get a rental, let alone her own house b/c of student loans and a less than stellar credit score. She's a professional with little debt -- well, b/c she can't get approved for anything -- but a very good income.
I've been in the same home for 25 years and have made improvements/updates along the way. If you're not going to live in a house for at least five years, it's not worth buying. There are programs available to first time home buyers to help with down payments.
I'd like to see some rehabilitation for the rules on FICA scores. There's people being punished for the mortgage debacle who had nothing to do with it.

[kayatarms]

03:25 AM on 03/23/2012

I'd rather own a home anyday than make an investor rich when homes are affordable and yes cheaper than rent. I just sold a single woman with a child a beautiful gorgeous updated flipper and she is saving $500.00 less than her apartment rental which is smaller than her home which offers a high efficiency furnace new, hot water heater and central air unit and roof for 70K. Now, the way I see it, a home is an investment, like stocks, they go up and down. They will go up again. Equity will be realized, and that rental will go up in rental for the investor and when it's time for that great market turn around. It will be interesting as to how many will be forced to move as investors will capitalize on a good market. I call the renters who are renting these investors homes, temporary house sitters until a better market, and when that happens you are out the door. I would be scared to get too comfortable. Can't get much worse, so take advantage of a market on buying a deal. But stay on top of these programs which are supposed to help the distressed!

[Ainsi sera groigne qui]

03:20 PM on 03/24/2012

Home prices in many areas *may* go up but there is no promise they will ever reach pre-bubble heights ever again. Then there is the serious question of tax reform which is not an "if" but "when" and what that does to many of the current deductions related to home ownership.

One this almost certain, you aren't going to get politicans of either stripe in large numbers going out on that limb again; pushing home ownership on *everyone*.

Living through great financial crisis events tend to scare persons for a very long time. Just ask anyone who grew up with or lived through the Depression and knew hard times. My grand-parents were some of the most tight fisted people one ever knew. *LOL*

[Ainsi sera groigne qui]

12:54 AM on 03/23/2012

Purchasing a home is actually the easy part. The difficulty comes in remaining and keeping up the property so one's "investment" is protected.

What got many persons into the trouble we see today is that they purchased homes without a firm clue or plan about home ownership. If one does not have a decent reserve fund for repairs and maintenance that dream home soon becomes a mill stone around one's neck.

[lofttypeofaview]

05:06 PM on 03/24/2012

That isn't what caused the problem. There are foreclosed homes that are in stellar condition. However they will become dilapidated because of no homeowners to upkeep them.

[Michael J Fanghella]

08:36 PM on 03/22/2012

This is one more of those simply misleading statements put out in the media, because affordability has little to do with cash flow. Its dynamics call for equity put in and put in I might add real estate market that truly is still over valued if one gives any credit to the data that allows valuation in the first place. Employment numbers are a misstatement directed at the media because surely banks are not buying into it. We allow ourselves out of nothing less than unsupportable hope to believe real estate prices are the leaders for us to get out of this deep recession. Real Estate follows trends follows true employment numbers, follows consumer spending, hard goods purchased or manufactured and follows the banks view of it all. It does not lead markets until the markets support employment and per capita income.

The facts are income since 2001 per employee has gone down double digits. Two income families income has dropped; under employment is what drives the lowering employment percentage but we are still making less money not more disposable dollars available for the marketplace. This ain’t rocket science folks. Oh we allow ourselves to believe it is but it isn’t.

People are saving more and reducing debt not because we believe in our government capabilities to lead us out of this mess, but because of the opposite. Don’t allow yourself to be fooled once again by the voice of the wizard behind the green curtain….again.

[kinopravda]

07:59 PM on 03/22/2012

Not surprising, it's always been the case that it's more expensive to be poor. I think the Washington Post was the paper that recently did a series on this.

[clearasmud]

07:09 PM on 03/22/2012

Student Debt will keep the housing market from improving anytime soon. And, some of the things this article does not talk about are all the "extras" in money owning a house requires: Utilities, Repair, Insurance, Taxes, Time and Effort, etc. All those add in to the price of "owning" a home.

But, the worse thing about owning a home now is that you are trapped. You can't move because you can't sell.

[sindurrella]

06:34 PM on 03/22/2012

Sure owning a home is cheaper if you just go by the sale price of the house...but when you consider that houses are generally much bigger than apartments, you're heating and electric bills are going to be more, then add on garbage fees, sewer fees, landscaping, property taxes, homeowner's insurance, routine maintenance on the house (Gawd forbid you have to do any major repairs, like re-roofing or replumbing, or redoing all the electrical)...all of a sudden, renting is a real bargain!

[tdsmith771974]

11:07 AM on 03/23/2012

I agree! I prefer to rent because I know in our financial situation if anything major were to go wrong with the house there is no way we could afford to pay it. I would rather let the landlord handle all the other stuff and I will gladly pay him. If something goes wrong, all I have to do is make a phone call and the landlord will have someone out within a day or two to fix it, if he can't do it.