Despite the rising number of renters in the U.S., it is cheaper to buy a home rather than rent one in 72% of the 50 largest cities according to an index released by Trulia.com.
Trulia’s rent vs. buy index compares the median list price with the median rent on two bedroom apartments, town homes & condominiums listed on Trulia.com as of 1/10/11.
In 36 out of 50 of the country’s most populous cities, buying a two-bedroom home is less expensive than renting one. These cities also include many areas that have been hit hard by foreclosures, such as Sacramento.
A price-to-rent ratio of 1 to 15 means that it’s much cheaper to buy than to rent in a particular city. A ratio between 16 and 20 means that it’s more expenseive to rent than to buy, but depending on the family’s situation, buying could “make financial sense” the side siad. Any ratio above 20 indicates that owning is much more costly than renting in a city.
Top 10 cities to buy vs. rent:
|Rank||City||State||Price to Rent Ratio|
In 10 cities, renting is cheaper, but buying might make more financial sense, according to Trulia. These cities include Los Angeles, Boston, and Fort Worth, Texas.
The index considers the total cost of homeownership compared to the total cost of renting. Calculations for the total cost of homeownership include mortgage principal and interest, property taxes, hazard insurance, closing costs at time of purchase, homeowners association dues, and private mortgage insurance. The homeownership cost calculation also includes tax advantages from mortgage interest, property tax and closing-cost deductions.
Calculations for total rental cost include rent and renters insurance.
Top 10 cities to rent vs. buy:
- Trulia.com Rent vs. Buy Housing Ratios: First Quarter 2011 (mymoneyblog.com)