DSNews.com
BY: KRISTA FRANKS BROCK,
9/19/2013
Despite rising interest rates, owning a home is still significantly cheaper than renting at a national level and in most large metropolitan areas, according to Trulia’s Summer 2013 Rent vs. Buy Report.
While rising interest rates are closing the gap between renting and owning, owning is still 35 percent cheaper than renting nationally. A year ago, the difference was 45 percent.
“Recent mortgage rate and home price increases have made buying significantly more expensive than last year, but not enough to tip the math in favor of renting,” said Jed Kolko, chief economist for Trulia.
“This is because rates remain well below historical norms, and prices are still slightly undervalued, too,” he said.
With rents and home prices remaining constant, mortgage rates would have to enter the double-digits – about 10.5 percent – before renting became the better bargain, according to Trulia.
However, while owning remains more affordable than renting in all 100 of the nation’s largest metros, the threshold is closer in some markets.
Renting would become cheaper than owning in San Jose, California; San Francisco, California; and Honolulu, Hawaii, before mortgage rates reach 6 percent, according to Trulia.
The threshold for Orange County, California, and New York are 7 percent and 7.5 percent, respectively.
Of the top 100 metros, those where owning is most affordable compared to renting are Detroit, Michigan (65 percent); Gary, Indiana; (58 percent) and Memphis Tennessee (55 percent), respectively.
Mortgage rates would have to reach 32.8 percent for renting to be cheaper than owning in Detroit. They would have to reach 20.6 percent and 19 percent, respectively for the same to be true in Gary, Indiana, and Memphis, Tennessee.
While Trulia’s report offers market-level data, Trulia also offers an online Rent vs. Buy Calculator for consumers. Individuals can enter the prices they encounter in their local markets and the mortgage rate for which they qualify, along with a few other data points to determine the best path for them, personally.
