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SAN FRANCISCO, October 8, 2010 – Trulia.com (www.trulia.com), a top site for homebuyers, sellers and renters, released today results from its Rent vs. Buy Index, which tracks whether buying a home or renting is less expensive in America’s 50 largest cities, based on current market conditions.
“Choosing to buy a home or continue to rent is a highly personal financial and life decision that many people are grappling with right now,” said Pete Flint, CEO and co-founder of Trulia. “In the wake of the foreclosure crisis and ongoing struggles in the industry, we created the Rent vs. Buy Index to provide a bit more context about current marketplace conditions to help prospective buyers make the right decisions for their own personal situations.”
Trulia calculates the price-to-rent ratio using the average list price compared with the average rent of two-bedroom apartments, condos and townhomes listed on Trulia.com. To create the list, Trulia analyzed the largest 50 U.S. cities by population.
High foreclosure rates, falling home prices and widespread unemployment have led to multiple Florida and Arizona cities reporting homeownership as more affordable than renting; Detroit and Columbus also made the list of Top 10 Cities for homeownership affordability compared with renting for similar reasons. On the other end of the affordability spectrum, owning is significantly more expensive than renting in national and regional job centers like New York, Omaha and Seattle.
“Higher prices of homeownership in cities like Omaha and Seattle reflect the fundamental real estate truth that people want to live where jobs are relatively plentiful,” said Tara-Nicholle Nelson, consumer educator, Trulia. “Workforce demand has kept prices in these cities at a higher level, relative to other large American cities with less healthy job markets – Omaha, for example, has reported unemployment rates significantly lower than national averages.”
The Lone Star State reported interesting complexities with regard to statewide figures for the relative affordability of homeownership, as four Texas cities fell within the top 20 cities where owning is more affordable than renting. In fact, Arlington topped the list of large American cities in which buying is more affordable than renting; El Paso wasn’t far behind at number nine. However, Fort Worth ranked as the nation’s third most rent-favorable city.
Trulia.com 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. 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.
Top 10 Cities to Rent vs. Buy
|
Rank |
City |
State |
Price: rent ratio |
|
1. |
NY |
35 |
|
|
2. |
WA |
31 |
|
|
3. |
TX |
30 |
|
|
4. |
NE |
25 |
|
|
5. |
CA |
23 |
|
|
6. |
MO |
23 |
|
|
7. |
OR |
22 |
|
|
8. |
CA |
21 |
|
|
9. |
CA |
21 |
|
|
10. |
MA |
20 |
Top 10 Cities to Buy vs. Rent
|
Rank |
City |
State |
Price: rent ratio |
|
1. |
TX |
7 |
|
|
2. |
CA |
8 |
|
|
3. |
FL |
9 |
|
|
4. |
AZ |
9 |
|
|
5. |
AZ |
10 |
|
|
6. |
FL |
11 |
|
|
7. |
MI |
11 |
|
|
8. |
OH |
12 |
|
|
9. |
TX |
13 |
|
|
10. |
TN |
14 |
Download the graphic for above data chart here.
To see how the largest 50 cities in America ranked on this month’s rent vs. buy index, click here.
Methodology
Trulia calculates the price-to-rent ratio for the 50 largest U.S. cities using the average list price compared with the average rent on two-bedroom apartments, condos, townhomes and co-ops listed on Trulia.com. This Index considers both the total cost of home ownership against the total costs of renting (examples of costs for both home ownership and renting outlined below).
Sample Price-to-Rent Ratio Calculation:
Average List Price: $90,445.60
Average Rent: $936.30
Price-to-rent ratio: $90,445.60 ÷ ($936.30 x 12) = 8.05
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.
About Trulia, Inc.
Trulia.com is the most comprehensive real estate site focused on empowering you with smarter tools to help you find the right home. Whether you are an active buyer, seller or real estate enthusiast, Trulia gives you all the information you care about from rich property data to a personalized search experience. We are focused on helping you find the home that truly meets your needs, and delivers on what’s most important for you. Ultimately, we built a smart real estate search experience bringing together local information, community insights, market data and national listings all in one place, all for you.
Media Contacts:
Chip Scarinzi for Trulia, chip.scarinzi@edelman.com, 415-486-3221
Ken Shuman, kshuman@trulia.com, 415.517.7211
