New Study Looks at Buying Vs. Renting

Buying a home is a better deal than renting in the United States’ 100 biggest housing markets, but it’s a very close call in nearly a third of those areas, according to’s Winter 2014 Rent vs. Buy Report.

In Honolulu, for example, if the mortgage rate were to climb higher than 5 percent, renting becomes a smarter choice, given current prices. San Jose and San Francisco are also borderline cases, if rates hit 5.4 and 5.8 percent respectively. Nationally, the tipping point is around 10.6 percent—a rate we haven’t seen since the late 1980s.

“Buying remains cheaper than renting across the country even after 2013’s big price rebound,” said Jed Kolko, Trulia’s chief economist. “Mortgage rates are still near historic lows, despite rising a point in the past year, and would be the envy of time travelers from the 1980s, 1990s, or 2000s.

“Even in markets like San Francisco, where home prices are high relative to paychecks, buying costs less than renting for people who stay seven years and itemize their deductions.”  There’s one major X factor in these calculations, Trulia cautioned.

“In many markets, the rent-versus-buy decision depends on the one factor you can’t control or perfectly predict: what happens to home prices after you buy,” Kolko said. “Sharp price appreciation could make home ownership essentially free, but price declines could mean that renting would have been the better deal in hindsight. The current home-price recovery could lull prospective buyers into thinking that future price gains are inevitable, but when doing the rent-versus-buy math, people should prepare for the worst, not just hope for the best.”

Article Courtesy of Community Investor Magazine