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Top American cities for renting or for buying
Perhaps not surprising to any of us, even though SF rents on 2 bedrooms average over $2000 a month, our fair city is still much more affordable for renters than it is for buyers. This is not the case, however, in many other Californian cities nor in cities within our closely neighboring states.
The real estate search and information site, Trulia.com, recently assessed American cities for rent vs. buy affordability. The methodology was to collect data from the top 50 most populated American cities, calculating the price-to-rent ratio using the average list price compared with average rent on 2 bedroom apartments, condos, and townhomes.
Study's Definitions:
Total costs of home ownership include mortgage principal and interest, property taxes, hazard insurance, closing costs at time of purchase and ongoing HOA dues and private mortgage insurance, where applicable. Total costs of homeownership include an offset for the tax advantages of homeownership, including mortgage interest, property tax and closing cost deductions.
Total costs of renting include rent and renter's insurance.
Rent vs. Buy Index - Interpretation Key
Price-to-Rent Ratio of 1-15: It is much less expensive to own than to rent a home in this city.
Price-to-Rent Ratio of 16-20: It is more expensive to own a home in this city are The total costs of ownership of a home in this city are greater than the costs of renting, but it might still make financial sense depending on the situation.
Price-to-Rent Ratio of 21+:The total costs of owning a home in this city are much greater than the costs of renting.
Below are the tables for the best cities to buy in, vs. the best cities to rent, in terms of expense.
Top 10 Cities to Buy Rather than Rent
Commentary: Best Cities in Which to Buy vs. Rent
* Areas hardest-hit by the foreclosure crisis top this list-- cities in California, Nevada, Florida and Arizona. Large numbers of foreclosures in these areas caused home prices to plummet: it's actually significantly less expensive in these cities to buy than rent.
* The average price-to-rent ratio for these Top 10 Cities to Buy vs. Rent was 9. A price-to-rent ratio of 15 or below is what economists say indicates that buying a home costs roughly the same as renting, so clearly in these areas, buying offers good financial value.
Top 10 Cities to Rent Rather than Buy
Commentary: Best Cities in Which to Rent
* These areas tend to be urban job centers with large rental markets.
* Some of the mid-western and southern regional hubs (such as Omaha, Dallas and Oklahoma City) never had the big inflation in home prices early in the decade, thus escaped the bubble and deflating home prices at the end of the decade. Stable home prices in these economic centers result in more affordable renting than buying in these areas.
* The Top 5 on this list which ranged from 22 for San Francisco and Portland to 33 for New York City, most of the rest of the cities on the list of 100 did not have ratios astronomically more expensive to buy than rent.
* For many of these cities, even though home buying is significantly more costly than renting, prices are still much lower than they have been in a long, long time. For example, in 2007, Miami's price: rent ratio was 27 - now it's 8. San Francisco's was 38 - now it's 22.
| June 03 2010 at 11:30 AM
Daily commentary on the nation's most diverse and unpredictable real estate market.
By Anna Marie Hibble, Tracey Taylor, Carolyn Said, Robert Selna, Read Bios
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