To Rent or To Buy? That Is the Question
Diane Ellis, Ed. ·
Jan 25, 2011 at 2:20pm
This graphic (via Trulia) demonstrates the rent to buy ratio in 50 of America's largest cities. The darker the green, the more affordable it is to buy; yellow, orange and red progressively signify markets in which it's more affordable to rent than to buy; and the olive/beige color represents cities in which it makes just as much sense to buy as it does to rent.
Some interesting factoids from Trulia:
- Only 8% of America's largest cities are markets where renting is more affordable than buying a home.
- 20% of large American cities fall in a grey area where buying may actually be more financially sound even though it is less expensive to rent
- In the wake of the housing crash, it's now more affordable to be a homeowner in 72% of major U.S. cities
So do you live in an area where it's more affordable to rent or to buy?
(h/t Daily Intel)
- Comment (22)
- · Quote
- · UnfollowFollow (2)
- Pages:
- 1
- 2
- Pages:
- 1
- 2
Comments :
Jun '10
Re: To Rent or To Buy? That Is the Question
The housing market has been so weak of late I'm actually not sure. I live ten miles west of NYC. My mortgage payment (not including the outrageous property tax bill & homeowner's insurance) is less than my daughter's NYC rent on a rather dumpy & small one bedroom apartment -- a fifth floor walkup. You can't realy compare NYC to anywhere else, though. Property taxes are the killer in New Jersey.
Nov '10
Re: To Rent or To Buy? That Is the Question
I just checked for Halifax with rent using the average (couldn't find a median) rent of 900/month & home price median at 240000; which gives 22. And it's probably worse, because here we don't have the mortgage deduction, and I notice Tulia doesn't account for home maintenance & upkeep, while in many rental units utilities, 5 appliances, and parking are supplied.
Jul '10
Re: To Rent or To Buy? That Is the Question
Only during rare periods of high price appreciation has home ownership actually made more economic sense than renting.
Factor in the true costs of home ownership - taxes, insurance, maintenance, mortgage interest, mortgage insurance, mortgage fees, realtors' fees - and very few homeowners enjoy a "profit" on the sale of a home which exceeds what they could have realized by renting and putting the extra money to work in other forms of investment.
The real "value" of home ownership is intangible: a place of your own, with space and amenities you wouldn't have with a rental. But that comes at the expense of mobility: one can simply hand over the keys to one's landlord and strike off to some other place, some other opportunity. Not so easy - especially these days - to be so footloose when you're an owner.
Jun '10
Re: To Rent or To Buy? That Is the Question
The rent/buy question is more dependent on the individual than on the market. When contemplating home ownership, the market plays a role in calculations in the form of inflationary expectations. There is no question that money saved today beats money "expected" tomorrow, but that said, housing is all about equity where rent is all about expense. The question to ask at this point is will the equity gain in a house compensate the owner enough for the forgone savings that must be paid to own a home. In high inflation markets one should not wait to buy a home, if buying is a real option. The exact opposite is true if the homeowner/renter is looking at a deflating market. Indeed, the foregoing sentence is the capsule version of why the real estate market in the US has not started recovering. What investors sense is that the market is not at the bottom, so they will not buy today because they expect prices to fall even further tomorrow. This condition is analogous to each of us not buying on Monday something we expect to be marked down as a weekend special.
Edited on Jan 25, 2011 at 4:19pmJun '10
Re: To Rent or To Buy? That Is the Question
Now, on to the proper calculation of expenses. When adjudicating the lease versus buy option, most people get the question of expenses wrong. For example, you have two choices to pay rent of say $1,100 per month or to pay a mortgage payment of say $1,200 per month. You must live somewhere, so the lowest cost option already represents spent money, The number to use in balancing future equity gain against the increased cost of home ownership is therefore $100 ($1,200 - 1,100). Likewise with insurance, if you are going to spend $200 per month to insure a house and $50 per moth to insure an apartment the incremental cost of home insurance is $150. By now it should be obvious that the lease/buy question is NOT a budget question in that when you budget you want to ascertain whether you can afford to either rent a particular apartment or buy a particular house, but whether the equity gained through home ownership is sufficient compensation for the incremental cost associated with owning a home.
Edited on Jan 25, 2011 at 8:46pmRe: To Rent or To Buy? That Is the Question
I live in Hillsdale, Michigan where you can buy a century-old Victorian in pristine condition with 3000 square feet for not much more than $150,000. Of course, there are no restaurants worth going to.....
Dec '10
Re: To Rent or To Buy? That Is the Question
Gosh, the variables run to extremes. I would say that it makes more sense to buy, here in Florida and even buy more, while prices are down. My fiancee and I have talked about buying a second place and putting our house up for rent, because she wants to get out of the country and we both want to be on the water. I like the country, but would be fine with (relatively) inexpensive waterfront.
The problem is that we could not sell our place, so we'd have to rent it out. Rents are going up because Florida is up over 12% in unemployment, so people are losing their houses and having to rent. Buyer's market, we could rent our place out and do well, I'm too chicken to make the jump because she took a job that paid less, but was more secure, and my income is down by more than 70 percent, and unpredictable.
Rent, buy? I just hope we hang on!
Jun '10
Re: To Rent or To Buy? That Is the Question
So here's the down and dirty guide to making the decision: The greater the gap between the cost of renting and the cost of homeownership the higher your expected equity gain must be in order to encourage you to become a home owner.
Real equity is a measure of how much your asset has appreciated relative to inflation less any gain that results from paying down your own mortgage. What most home owners are looking for here is some lump sum of value that they can realize when they sell. The problem with an absolute dismissal of this lump sum capital gain as being "unprofitable" is the implicit assumption that the home owner had some array of investment options that promised a better return than the house he bought. In general this is not the case. Why this is important is that dismissing home ownership as a "profitable" investment is heavily dependent on the question of "opportunity cost". Opportunity cost is a measure of the potential earnings associated with a foregone investment or lost opportunity.
Re: To Rent or To Buy? That Is the Question
Here in San Francisco, you can rent a decent 2 bedroom apartment for $2400 (though according to Trulia median rent for a 2 bdrm is $3000 - $3500. Steep). But I know folks who've bought 2 bedroom apartments/condos in the city, and it's really tough to do for under $750,000 (which corresponds to the Trulia median). Much smarter to rent here than to buy. Unless you're one of those very rich folks who can afford a mansion in Pacific Heights, and can stomach having Nancy Pelosi as a neighbor. Ain't a more beautiful neighborhood anywhere.
Re: To Rent or To Buy? That Is the Question
Paul A. Rahe: I live in Hillsdale, Michigan where you can buy a century-old Victorian in pristine condition with 3000 square feet for not much more than $150,000. Of course, there are no restaurants worth going to..... · Jan 25 at 3:41pm
Why is this so? There are plenty of college students and faculty to provide patronage in Hillsdale, no? Even in tiny Hanover we had one good restaurant, and there was a really nice place just across the CT River in Norwich, VT.
Jul '10
Re: To Rent or To Buy? That Is the Question
Those of us in Marin County might beg to disagree. And we can still get Happy Meals...
Jul '10
Re: To Rent or To Buy? That Is the Question
Diane Ellis, Ed.
Paul A. Rahe: I live in Hillsdale, Michigan where you can buy a century-old Victorian in pristine condition with 3000 square feet for not much more than $150,000. Of course, there are no restaurants worth going to..... · Jan 25 at 3:41pm
Why is this so? There are plenty of college students and faculty to provide patronage in Hillsdale, no? Even in tiny Hanover we had one good restaurant, and there was a really nice place just across the CT River in Norwich, VT. · Jan 25 at 3:58pm
He means a nice restaurant, Diane; not a college-nice restaurant.
You know, a place where you can't get in wearing a t-shirt, sweat pants and flip-flops.
Re: To Rent or To Buy? That Is the Question
Kenneth
Diane Ellis, Ed.
Paul A. Rahe: I live in Hillsdale, Michigan where you can buy a century-old Victorian in pristine condition with 3000 square feet for not much more than $150,000. Of course, there are no restaurants worth going to..... · Jan 25 at 3:41pm
Why is this so? There are plenty of college students and faculty to provide patronage in Hillsdale, no? Even in tiny Hanover we had one good restaurant, and there was a really nice place just across the CT River in Norwich, VT. · Jan 25 at 3:58pm
He means a nice restaurant, Diane; not a college-nice restaurant.
You know, a place where you can't get in wearing a t-shirt, sweat pants and flip-flops. · Jan 25 at 4:02pm
This is the place in Hanover. No Restaurant Gary Danko, but still. And this is the place in Norwich, Vt. Actually quite formal and delicious.
Re: To Rent or To Buy? That Is the Question
Diane Ellis, Ed.
Paul A. Rahe: I live in Hillsdale, Michigan where you can buy a century-old Victorian in pristine condition with 3000 square feet for not much more than $150,000. Of course, there are no restaurants worth going to..... · Jan 25 at 3:41pm
Why is this so? There are plenty of college students and faculty to provide patronage in Hillsdale, no? Even in tiny Hanover we had one good restaurant, and there was a really nice place just across the CT River in Norwich, VT. · Jan 25 at 3:58pm
Curious. What's the "one good restaurant" you consider to be in Hanover. I have my vote ... but wonder if it's the same....
Re: To Rent or To Buy? That Is the Question
Ursula Hennessey
Diane Ellis, Ed.
Paul A. Rahe: I live in Hillsdale, Michigan where you can buy a century-old Victorian in pristine condition with 3000 square feet for not much more than $150,000. Of course, there are no restaurants worth going to..... · Jan 25 at 3:41pm
Why is this so? There are plenty of college students and faculty to provide patronage in Hillsdale, no? Even in tiny Hanover we had one good restaurant, and there was a really nice place just across the CT River in Norwich, VT. · Jan 25 at 3:58pm
Curious. What's the "one good restaurant" you consider to be in Hanover. I have my vote ... but wonder if it's the same.... · Jan 25 at 4:11pm
See the link above (Canoe Club). What was your vote?
Re: To Rent or To Buy? That Is the Question
Diane Ellis, Ed.
Ursula Hennessey
Diane Ellis, Ed.
Paul A. Rahe: I live in Hillsdale, Michigan where you can buy a century-old Victorian in pristine condition with 3000 square feet for not much more than $150,000. Of course, there are no restaurants worth going to..... · Jan 25 at 3:41pm
Why is this so? There are plenty of college students and faculty to provide patronage in Hillsdale, no? Even in tiny Hanover we had one good restaurant, and there was a really nice place just across the CT River in Norwich, VT. · Jan 25 at 3:58pm
Curious. What's the "one good restaurant" you consider to be in Hanover. I have my vote ... but wonder if it's the same.... · Jan 25 at 4:11pm
See the link above (Canoe Club). What was your vote? · Jan 25 at 4:17pm
Whew. Same. I think we were writing comments at the same time. When I visit my parents (who live outside New London) we always go to the Canoe Club. Haven't ventured into Vermont for eats yet....
Aug '10
Re: To Rent or To Buy? That Is the Question
The value in the midwest is probably not to be compared to the coasts. Gosh we don't have restaurants. But then people buy a house and learn how to cook.
Where I live, the historic houses are for the taking and the four seasons are distinct . It is the perfect time for a rebirth of ownership in view of the downturn.
Are there that many jobs out there that people create the virtual graph plotting in order to sell houses, or newspapers ?
Jul '10
Re: To Rent or To Buy? That Is the Question
In Cairo? Rent. Definitely rent.
Aug '10
Re: To Rent or To Buy? That Is the Question
Hey Sisyphus (rock up!) If it floats, flies, or *'*** rent it ! And though *'*** is bad, Alexandria is bad too. Go over to twitter and look for @mfatta7
Edited on Jan 25, 2011 at 7:18pmMay '10
Re: To Rent or To Buy? That Is the Question
One of the reasons cheaper to buy than rent in Chicago is the property taxes on rental property are beyond astronomical.