Trulia: Buying costs 45% less than renting

If buying is such a great deal, why aren't more people doing it? Difficulty saving for a down payment, poor credit and job instability lead the list of reasons outlined in a new report.

By Teresa at MSN Real Estate Sep 13, 2012 2:47PM

© SuperStockIf you have good credit, itemize deductions on your tax return and plan to stay in your home at least seven years, buying is cheaper than renting in all 100 of the largest U.S. metro areas, including New York and San Francisco.

 

Nationwide, buying is 45% cheaper than renting, with the spread ranging from 70% in Detroit to 24% in Honolulu, according to Trulia's "Summer 2012 Rent vs. Buy Report."

 

"Despite the recent price rebound, rents continue to rise faster than prices, and mortgage rates are near record lows," Jed Kolko, Trulia's chief economist, said in a news release. "Homeownership makes the most financial sense for people whose strong credit scores let them snag the lowest mortgage rate and who get the biggest benefit from deducting mortgage interest and property taxes from their income taxes."

 

Post continues below

 

The Trulia analysis attempts to account for all the costs of homeownership, including closing costs, maintenance and property taxes. Cost of rentals includes a security deposit and renters insurance. The researchers looked at homes for sale and for rent from this past June to August.

In these cities, buying held the greatest edge over renting a comparable home:

  • Detroit: $1,149 a month to rent versus $349 to buy.
  • Gary, Ind.: $1,649 to rent versus $616 to buy.
  • Oklahoma City: $1,576 to rent versus $590 to buy.
  • Lakeland-Winter Haven, Fla.: $1,276 to rent versus $495 to buy.
  • Toledo, Ohio:  $1,222 to rent versus $476 to buy.

These are the cities where the cost of renting was the closest to the cost of buying:

  • Honolulu: $2,007 to rent versus $1,519 to buy.
  • San Francisco: $3,226 to rent versus $2,327 to buy.
  • New York City: $2,687 to rent versus $1,857 to buy.
  • San Jose, Calif.: $2,646 to rent versus $1,819 to buy.
  • Los Angeles: $2,020 to rent versus $1,379 to buy.

You can see the numbers for all 100 cities here.

 

Of course, to do these kinds of analyses, economists have to make certain assumptions. These calculations looked at renting similar homes, but renters often choose smaller spaces. Some of the metro areas have a wide variation in rents. While the cost of buying may be less than the cost of renting in the New York metropolitan area, buying may not be cheaper in prime neighborhoods in Manhattan.

Plus, if you don't have good credit, don't itemize deductions and don't plan to stay in a home at least seven years, your calculations would be different.

If buying is a better deal in so many areas, why aren't more people buying?

 

A new survey by Rent.com showed that 47% are still saving for a down payment, 22% are waiting for their credit scores to improve, 20% are waiting for better job security and 11% are waiting for the market to stabilize.

 

Trulia's Kolko writes:

Bottom line: Buying may beat renting in every major metro by a wide margin, saving consumers thousands of dollars a year, but buying still remains out of reach for many would-be homeowners.
 
28Comments
Oct 2, 2012 7:47AM
avatar

I live in a small town in Western Kentucky. When we built our home in 1981, at a cost of $48,500. We were estatic, when we secured a 10% fixed loan, when the current interest rates were close to 18%. After 18 years, we ended up paying $104,000.00 for that $48,500 house. Since moving in, we have replaced windows,doors, air conditioners, furnaces, water heaters, flooring, siding, roofs, ceilings, bathrooms, tubs and countless other things, that wear out over time, from normal daily use. Throw in the sewer problems, water leaks, taxes, insurances............

  I estimate that $48,500 house, has cost us well over $250,000. Because of the community we live, the house appraises at $85,000. What an investment!!!

  And how about the time, our water heater busted the day before we had planned to go on a long awaited vacation., but had to cancel, as we had to clean up the mess and wait on plumbers, (and give them my vacation money!) 

  If I was a renter, I could have called my landlord and said "YOU, have a water leak and I'm going on vacation, hope you have it fixed, when I get back!"

Oct 2, 2012 7:34AM
avatar

Sure, but believe this:  NO ONE is safe in their job or paycheck in this economy.  If you lose your job, there may not be as much opportunities in your present city and you may be forced to leave the city or starve!  What will you do?  You home is still there and mortgages need to be paid.  People may not buy your property as quickly as you may want to sell is.  If you move to another city, you will be forced to pay the mortgage AND your new rent/mortgage in the new city.  Yes, you can mitigate by getting a renter in your old property, but have the headaches of being a remote landlord hundreds of miles away.

 

So is it worth it?  Is it not better to rent a smaller unit or home (yes, you can rent a home) rather than assuming your paycheck will always be there for you to pay the mortgage?  There are other ways to build equity rather than owning a home.  That idea is old…  I REFUSE to own a property and risk being stuck in the place I am in, risking the prospect og no jobs in city I am in, unable to move and leading a frustrating existence.  You make your own choice.  Don’t believe every article you read on the internet is all I ask.

Oct 2, 2012 7:24AM
avatar

Renting is cheaper hands down what this left wing/Nobama supporter fails to tell the TRUTH about, is not so much the buying of the house, but the OTHER expenses that sink you in it:

 

 

Maintenance on a home:  You pay for

Maintenance on a rental:    FREE (most of the time)

 

Mortgages:  Increase yearly (upwards of 200.00 per year due to property tax increases)

Rentals:  Usually maximum of 50.00 yearly increase (most of the time it's less)

 

Heating and Cooling a home is usually much more expensive than a rental, and some rentals even include utilities.

 

If appliances break in a home, YOU are responsible for their repair, if you are in a rental, your landlord is.

 

Granted, you do not gain value in a rental, but when you consider that houses are NO LONGER the retirement nest egg they used to be, it dosen't matter anyway. 

 

GO ROMNEY 2012!!!

 

 

Oct 2, 2012 6:21AM
avatar
The answer is: it depends. It depends when you bought, when you sold, etc. I have many clients whose mortgage payments are double or triple than what the house would rent to strangers. I have a client whose mortgage payment on his owner-occupied 2 family is over $5,000 per month, yet the other side rents for only $1,600.00! He is underwater by over $200,000. He is better off renting from himself(!)

I have other clients whose 20% down payment has vanished with the plummeting home values. On the other hand, there are houses you can now purchase that are the same price as a car.

This housing market will not turn around until at least after the year 2020. This is based upon the fact that in NJ alone, there are approximately 40,000 foreclosures that have not yet hit the market. I have learned this information from attorneys I know that represent the largest banks. That figure does not include defaulting loans that are not yet in foreclosure.

The reality is the housing market may never ever be what it was and what happened in the past will never happen again.

The common theme in all of these articles is that everything is ok so go out and buy a house. As you are all aware, the individuals who write these articles work for companies that benefit when there is a lot of buying, selling and borrowing. The object is to get you optimistic to borrow and buy.

I hope I am wrong and things do turn around, but I just do not see that happening.
Oct 2, 2012 4:21AM
avatar
I personally prefer to own vs rent.
Oct 2, 2012 3:13AM
avatar
More liberal corporate media pushing the broke and over-fleeced middle class back into real estate.  It's utterly disgusting reading this crap that is being pushed by "news" organizations.  The Comcast financial crook newwork is the worst of them all.
Oct 2, 2012 2:44AM
avatar
I suppose a lot depends on your individual circumstances.  I'm planning on retiring in 9 years and figured renting was my best option in NYC.  But I found a nice coop apartment in Westchester, and after factoring in interest, taxes and maintenance fees, over 30 years, I'll save about $250K in buying vs. renting.  That's a big chunk of retirement change!
Sep 22, 2012 5:25PM
avatar
Looks like Truilia is trying to feather there own nest This article is so inaccurate
Sep 22, 2012 5:05PM
avatar
In most places it is cheaper to own then to rent, because rates are low.  But remember if you don't have perfect credit you are S.O.L.  the banks, will stick it to you with higher rates as will your credit union.  The bottom line is move back home and mooch off the family until you save your down payment and give up your first born to the banks and credit unions for that down payment.  Have a nice day.  I need a room mate....   
Sep 22, 2012 3:27PM
avatar
Depends on timing, the condition of the house, and your particular real estate market.  I bought a home and lived in it for 4 yrs before selling.  Just about broke even, and that's after tallying up everything I'd put into it except property tax, homeowner's insurance, and utilities.  It was way, way cheaper than renting would have been.
Sep 22, 2012 1:47PM
avatar
Used to be you could turn a profit on a house that was some time ago.  My first house I bought in 73 I made a profit after investing some money in it.  The home I have now I will probably lose money on.  My advice on buy or rent is to rent.  The banks and wal street are wanting it that way.  They want to make a killing owning all the property and renting to us.  Cars will be bought this way in a few years it will be all lease they make too many  cars and by leasing they can keep more new cars on the road. Got to give the banks and the geeks on wal street credit they were very patient on this real estate fiasco.  They have stained most peoples credit so they don't qualify for the cheaper loans just the wealthy do. The banks are borrowing money from the fed for near nothing and trying maximize every loan.  Many people, alot of pro athletes have tried to invest in realesate and went bankrupt.  I read the other day where the football coach for the U. of Arkansas owed 25 million dollars he could not repay in failed realestate deals.  Rent people they are working on new legislation (behind closed doors) to take every right away from a renter  and give all power and authorit to the property owner.
Sep 22, 2012 1:35PM
avatar
Sometimes I wonder who writes these stupid articles.  I don't believe there is any truth in this story at all.  I own a home and with payments, taxes and big insurance companies taking their large slice, I don't think there is any difference than if I was renting.  At least a renter doesn't have all the head aches.  All they got to do is pay the rent and pay their utilities.  In fact, I kind of believe renters may actually be coming out cheaper.  The American dream of home ownership isn't what it use to be. 
Sep 22, 2012 11:59AM
avatar
Just lost my home, after paying what amounted to 1 1/2 times the equivalent rent payment for 12 years. Plus HOA dues, taxes, upkeep and maintenance, all the utilities, etc. Never again. Renting is simpler and I'll pay a premium if necessary (I seriously doubt that necessity, but whatever) to rent and leave my options wide open from here on out. I've got far better places to invest my money with much less risk and better return. Anytime a bank is involved, you are at risk. That is the moral of my story.
Sep 22, 2012 10:11AM
avatar
I just lost 80 grand the last 5 years selling 2 homes to move.... never again
Sep 22, 2012 6:57AM
avatar

Buying can be cheaper than renting here in Houston TX.

 

A few weeks ago there was a news article about how the rental rates were rising up to 11.2% in the Houston TX metro area.

 

There was one couple mentioned in the article that had sold their local home here and decided to rent for awhile before purchasing another home. They leased a nice 2 bed, 2 bath apartment with amenities for $1,115.00 in the suburbs of Houston. After being there for one year they were informed that the rent was going up an additional $350.00 per month. So instead of paying $1,465.00 for the same apartment, they decided to move into a 1 bed, 1 bath apartment in the same complex for $945.00 per month.

  

I just refinanced my 5 yr old home at 4.00% interest, my new payment with taxes & insurance included is $999.73 per month in the suburbs of Houston. My home has 2325 sq" with 4 bedrooms,   2 1/2 baths, family & game room and a 2 car garage on a large oversized lot.

 

I also understand that buying verses renting is a personal choice and that an individuals choice can be related to numerous factors such as an individuals prefences for mobility, stability, finances, etc.

 

If you decide to purchase a home, don't buy a home as a long term investment. Look at the purchase of the home as a comfortable shelter, where you create lasting memories, where you can have the freedom to paint the walls, decorate, entertain, have overnight guest over and have pets without having to ask permission from management for approval.

 

 

 

 

 

 

 

Sep 22, 2012 6:01AM
avatar
Sorry ,I don't agree ,my mortgage is more costly than to rent ,you forget to say you need to pay the property tax and the insurance that rip you off like Citizen for instance ,welcome to the real world !
Property in Florida . 
Sep 22, 2012 6:01AM
avatar
Sorry ,I don't agree ,my mortgage is more costly than to rent ,you forget to say you need to pay the property tax and the insurance that rip you off like Citizen for instance ,welcome to the real world !
Property in Florida . 
Sep 22, 2012 5:41AM
avatar
Where I live I don't see the rental rates going up much.  The repo homes are being scavenged up by investors,  which is good,  but the rentals are in a state of oversupply as a result.
Maybe next year.
We have been saying that for 5 years now.

Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

FIND YOUR DREAM HOME OR APARTMENT

or

WHAT'S YOUR HOME WORTH?

HOME IMPROVEMENT PROFESSIONALS

Find local plumbers, electricians, contractors and more.

from our partners