America's cheapest housing markets
In these markets, it costs barely more to buy than it does to rent. So what are you waiting for?
Pittsburgh ranks No. 2 in BusinessWeek's rankings of America's cheapest housing markets. © Getty Images
Home prices have dropped so much that the cost to own and maintain a house in many metros is only a bit more, and sometimes even less, than the cost of renting.
BusinessWeek.com teamed up with research firm Reis to rank 20 metros where it's almost as cheap to buy as it is to rent. (Reis made the calculations using its own second-quarter rent data and second-quarter home value data from Zillow.com.) We found two metros, Detroit and Pittsburgh, where renters can actually lower their monthly expenses by buying. The rest of the list, featuring metros where buying was only slightly more expensive, included Rochester, N.Y.; Memphis, Tenn.; Tampa, Fla.; Cleveland, Tenn.; Columbia, S.C.; Dallas; Las Vegas; and Providence, R.I.
To create a fair matchup between owning and renting, we calculated ownership costs assuming a fixed 30-year loan for 100% of the purchase price with no down payment. If we had instead decided to factor in a 20% down payment, owning would have been the cheaper option for the top 10 metros on our list.
"It's a great time to buy," says Mollie Carmichael, senior vice president of John Burns Real Estate Consulting in Irvine, Calif. "If you can own a home for less than the cost to rent, then it's a logical financial proposition."
An opportunity for new buyers
The housing slump has brought the own-versus-rent equation closer to where it was before the housing bubble drove sale prices way above rental costs. (Rents are also falling now, but at a much slower pace.)
The foreclosure crisis has trampled down prices from Tampa to Riverside, Calif. And low interest rates and government incentives such as the $8,000 first-time homebuyer federal tax credit, which expires this year, are attracting new buyers previously priced out of the market. The American dream is getting more affordable. In Tampa, for example, owning was 15% more expensive than renting in the second quarter. But it was 46% more expensive than renting a year earlier.
Bing: Search & decide
Greg Ghodsi, senior vice president at Raymond James in Tampa, says buying a principal residence in Florida now makes more sense than it did during the housing boom.
"If you have a job and are looking for a primary residence, you can get places here in Tampa that aren't cheap, but relative to where they were, are fairly priced compared to renting … The whole equation has changed," Ghodsi says.
Be prepared to stay awhile
Of course, different people have different notions of what cheap means and buying isn't an option for everybody. Many renters are now losing jobs and banks are raising standards for mortgages. And the housing market still poses significant risks as prices continue to fall and foreclosures rise. Stan Humphries, chief economist at Zillow.com, says prices are likely to continue to fall and then begin to appreciate slowly, so buyers should plan to stay put for a minimum of five to eight years or risk making a loss.
"It's a fool's errand to try to time the bottom for both economists — and buyers and sellers," Humphries says. "If you found a house that you love and want to be in for a long period of time, now is potentially a good time to wade into the market."
With the first-time homebuyer tax credit expiring and the possibility that interest rates will start rising, it might pay to act quickly, says Victor Calanog, director of research for Reis. But rents are dropping, too, so tenants might also be able to cut monthly expenses by seeking out apartments with lower rents or concessions, he says.
"This might be the time to seriously evaluate the decision of whether to rent or own," Calanog says.
The 10 cheapest housing markets
- Rochester, N.Y.
- Memphis, Tenn.
- Tampa, Fla.
- Cleveland, Tenn.
- Dayton, Ohio
- Columbia, S.C.
- Orlando, Fla.
- Dallas-Fort Worth
View the rest of the top 20 cheapest housing markets on BusinessWeek.com.
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This is my take............... if a home has gone down in value, is it a deal? Think about this......If a home that was 40 years old (nice 1200 sf starter rambler in the Mn market), sold for 15K new and took 40 years to rise to 100k, but them jumped in value to 230K in 5 years, what price is a deal?
With property taxes still on the rise (St. Paul, Mn wants to raise them another 6+%) what price is affordable?
Remember that it wasn't the government that accepted the crazy price inflation, it was the American people. Do your research and look at the web sites most counties provide, see what the house value was 5-7 years ago.
I really think these stories are placed to try to make people feel that things are getting better when most of us who see what's going on around us know that they are not getting any better in any part of the country. Oregon just hit the top ten in the country in foreclosures and we have been in the top ten for unemployment for more than two years now. Where is the increase in factory jobs any where in the country. they are all going overseas since NAFTA went into effect. Kind of hard to buy a house on a service industry job. hard enough just to pay rent and maybe go on a vacation every two or three years. if that. I went to Spain last month and the timeshare places were mostly full but the hotels were crying for business. and this is high tourist season there. Orlando is going down fast and so are all the other tourist areas in the country. Is this somebody's plan to pull the rug out from under the Middle class.? I am not saying it is but I am just asking. I for one am ready to go to Washington and let them know I am mad as hell and am not going to take it any more but the would just call me a right wing nut case and probably have my taxes audited.
Has anyone been to Belize and can you tell me what the current conditions are like there? I am deadly serious about moving out of this country at least for the foreseeable future.
What this list does not tell you is that for one thing, these areas are all crime ridden places, and two, the
unemployment rate is quite high in many of them also. So....buying a home there may not be such a good
idea when you weigh all the factors!
I feel this article is very deceiving, the author is not including the real costs to owning a home for example insurance, taxes, and PMI if you don't have a large down payment. Those items make up almost 1/3 of our house payment monthly. Our monthly payment is almost 1800, this does not include water or electricity. Our electric bill is almost 250 a month. Water is 250 every 6 months.
This list left out #1 Buffalo ny. Most houses are less than $25,000 with the exception of north buffalo (small area with houses around 200k)
Here you can rent for under $400 a month or own for starting around $200 per month in a lot of homes with a fxed rate mortgage, not the variable rate scams.
Perfect example, my mortgage with the taxes rolled in is under $300 and I have a double with a driveway and garage. 3 stories, 2200 sq. ft.
How cheap is detroit?
Of course it costs less to buy than rent in Memphis.It is ranked second only to Detroit in the number of homicides per capita.Sure you can buy a home cheap there.The odd's of you living long enough to pay it off are about 1 in 10. Well,they are actually a little better than that but the quality of life is about like the slums of Tiajunna.I know this because I was born and raised there.I moved away the last time I lived there in fear for my life. I chose to live on the streets in San Diego over an apartment in a supposed "white" neighborhood in Memphis.
Cleaveland,Tn.? Good luck finding a job in that wasteland. Maybe if you want to work in a "service industry" you MIGHT find a minimum wage job. Perhaps the paper mill just north of town where there is so much chlorine in the air everyone is either blond or bald. You have to smoke just to protect your lungs with a layer of tar!!! I worked in a bakery there (NOT Little Debbie) in a 150 degree oven room (and thats in the winter) for $7 an hour.Welcome to Hell,enjoy your stay.Really.
Don't waste your time buying a home now wait till 2011 when the next foreclosure disaster should be ending. Central America looks good and the cost of living is much better and the taxes are so much better. After the dust settles in 2012 I may look at coming back to this country but until then its time to get out and let the nut cases run amuck. I am a political independent and am waiting for the next good political party to form because I cant stand the two now and am tired of holding my nose to vote in a general election. Both parties need to be torn down and rebuild on the ideals of the constitution that built this country. since the Repub's and Dem's pushed through NAFTA this country has been on track to a big train wreck and guess what its here but only the first wave the second wave is about 18 months to 2 years out. Hold on tight!
Cleveland, Tennessee?!? I'm 99.99% sure that's supposed to say Cleveland, ohio!
I'm from cleveland, and I jut saw an article similar to this in Time magazine that listed Cleveland Ohio as one of the most affordale places to own a house.
BASIC FACTS, PEOPLE!