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Buying real estate a better deal than renting

in 74% of major US cities

Inman News™

Buying real estate continues to be cheaper than renting in the vast majority of major U.S. cities, according to a quarterly rent vs. buy index from real estate search and marketing site Trulia.

The index compared the median list price and the median annualized rent on a two-bedroom apartment, condominium or townhouse in the country's 50 most populous cities. According to the index, the cost of buying was less than renting in 37 of the 50 cities (74 percent) as of July 1, 2011. About the same share, 78 percent, favored buying over renting in Trulia's last index report, released in April.

Trulia defines total costs of homeownership to include "mortgage principal and interest, property taxes, hazard insurance, closing costs at time of purchase and ongoing (homeowners association) dues and private mortgage insurance, where applicable. It also includes an offset for the tax advantages of homeownership, including mortgage interest, property tax and closing cost deductions."

"Many aspiring homeowners are on the fence about renting and buying in today's market. Should they take advantage of falling home prices and low borrowing costs, or should they continue to rent until the economy stabilizes?" said Ken Shuman, spokesman for Trulia, in a statement.

"Price alone should never be the sole factor in deciding to purchase a home. 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."

A price-to-rent ratio of 1 to 15 means that it's much cheaper to buy than to rent in a particular city. Las Vegas, Detroit, and Mesa, Ariz., most favored buying among major cities.

Top 10 cities to buy vs. rent:

Source: Trulia

A ratio between 16 and 20 means that it's more expensive to rent than to buy, but buying may be better than renting "depending on personal circumstances, such as one's tax bracket," Trulia said. Any ratio above 20 indicates that owning is much more costly than renting in a city.

According to the index, renting was much cheaper than buying in six cities: New York; Fort Worth, Texas; Omaha, Neb.; Seattle; San Francisco; and Kansas City.

Top 10 cities to rent vs. buy:

Source: Trulia

Most foreclosure hot spots saw their price-to-rent ratios drop in the first half of this year, with Detroit seeing the biggest decline, at 39 percent. Miami, however, was an exception. "A mini buying boom created by foreign investors and foreclosure freezes have caused (Miami's) price-to-rent ratio to jump by 112 percent: from 6 in January to 13 in July," Trulia said.

Here's an interactive graph from Trulia that illustrates how cities compare on the rent vs. buy index over the last six months and includes foreclosure and job market data:

By Inman News, Tuesday, August 16, 2011.  

MILITARY HOUSING ASSISTANCE PROGRAM

Daily Real Estate News  |  August 14, 2009  |

10 Cities Leading the Market Recovery
Here’s more evidence that housing is turning around. Forbes magazine identified 161 of the country’s largest metro areas where sales activity has increased compared to 2008, and where foreclosure sales as a percentage of total sales, are low.

The magazine considers these markets as on the road to recovery.
1. Miami-Ft. Lauderdale, Fla.
2. Lincoln, Neb.
3. Colorado Springs, Colo.
4. Salem, Ore.
5. San Luis Obispo, Calif.
6. Bremerton, Wash.
7. Denver, Colo.
8. Redding, Calif.
9. Santa Barbara, Calif.
10. San Jose, Calif.

Source: Forbes, Matt Woolsey (08/13/2009)
 

New Fannie Mae Guidelines for Second and Investment Homes

July 14th, 2008 categories: Buying Real Estate, Market Trends, Mortgage Help, Real Estate News

It seems that Fannie Mae, the private, shareholder-owned, NYSE-listed financial services company that serves the American home mortgage industry, has recommended new guidelines for lenders. These guidelines deal with buyers who are seeking to purchase a new primary residence while converting their old one into a second home or an investment property.

While this is only from one investor and not an official publication from Fannie Mae, he said that most other investors will fall in line or close to it on these new guidelines because they come from Fannie Mae. These guidelines are meant to ensure a borrower’s financial stability and help prevent future mortgage default and foreclosure.

While these new guidelines are not yet in effect, they could go into effect at any time. At issue is how mortgage lenders qualify borrowers for mortgages when they already have an existing mortgage on a primary residence.

Borrowers who currently own a home typically have three options when they decide to purchase a new principal residence. They can:

• Sell the current residence and pay off the outstanding mortgage

• Convert the property to a second home, assuming they can qualify with both the existing and new mortgage payments, or

• Convert the property to an investment property and provide documentation that they will rent the property and use the income to offset the mortgage payment

These policies and guidelines are in place to ensure that borrowers have sufficient equity and/or reserves to support the existing financing and the new mortgage being originated. However, Fannie Mae is updating the policies for qualifying borrowers purchasing a new principal residence and converting their existing principal residence to a second home or investment property to better ensure that borrowers will be able to support both financial obligations.

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