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Buying is cheaper than renting in three-quarters of U.S. cities

[Aug 17, 2011.]

 

It is cheaper to buy a home than to rent in 74 percent of major cities in the U.S., according to a Trulia survey. The top cities where buying beats renting are Las Vegas; Detroit; Mesa, Ariz.; Fresno, Calif.; and Arlington, Tex. But renting gets you more bang for your buck in New York, Fort Worth, Omaha, Seattle and San Francisco. With mortgage rates near historic lows, it may be a good time to evaluate whether the time is ripe to apply for a mortgage.


Foreclosures make for cheap homes


If you live in a city that has been hit hard by foreclosures, buying can be very affordable. There may be a housing bargain out there for you to take advantage of now, but that may not continue to be the case. According to a statement from Trulia:



In Miami, for example, it is still less expensive to buy, but a mini-buying boom created by foreign investors and foreclosure freezes have caused its price-to-rent ratio to jump by 112 percent from 6 in January to 13 in July. Meanwhile, recent job gains in the auto industry have not countered Detroit's falling home prices. For now, the city has experienced a setback since January with its price-to-rent ratio dipping 39 percent. Las Vegas, on the other hand, continues to be the best place to buy instead of rent for the past six months.



The price-to-rent ratio in the Trulia survey is the median listing price divided by the annualized median rent. Ratios that are 15 and under indicate buying is less expensive than renting, while ratios that are 20 or higher indicate renting is less expensive than buying. Trulia's survey compares the cost of buying a two-bedroom apartment, condo or townhouse in the 50 largest cities in the U.S.


Should you get a home mortgage?


So with housing prices and mortgage rates so low, does it really make sense to buy a home? That depends on a lot of factors, so take time to carefully evaluate everything relevant to your situation before applying for a mortgage.


"Price alone should never be the sole factor in deciding to purchase a home," Ken Shuman, head of communications at Trulia, said in a statement. "Instead, buyers should first ask themselves if they plan to live in the home for at least seven to 10 years; could make monthly payments on the house; and have enough cash in the bank for a down payment and an additional six to eight months' worth of mortgage payments. If you can answer 'yes' to each of these questions, then the cost of buying a home definitely outweighs renting in most cities."

 

About Author:

Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.

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