Buying Beats Renting, But Not By Much In These Places

July 21, 2015 8:30 am  |  Comments: 0  | Views: 2443
    

Right now, homeownership is 35% cheaper than renting on a national level, according to a report from Trulia. Last year, it was 33% cheaper to be a homeowner than a tenant.

Home prices have risen slightly faster than rents over the last year, the report found. But at the same time, mortgage rates remain low, providing a nice financial advantage to buyers.

In Honolulu, it’s a much closer call.

It’s 16% cheaper to buy than rent in Hawaii’s capital, but once monthly homeowner’s association fees (HOAs) are taken into account, the favor swings to tenants as it becomes 1% cheaper to rent, according to Trulia. The median monthly HOA fee in the city is $438, the second highest in the country behind $575 in New York City.

San Jose, Calif.; Lancaster, Penn.; Sacramento, Calif. and San Francisco rounded out the top five markets where buying offers the smallest edge over renting in the country.

Californians tend to have a smaller financial gain when it comes to buying a home: six out of the 10 housing markets where buying has the smallest benefit over renting are located in The Golden State, the report showed.

Rising home prices bring higher down payment requirements and closing costs, which means buyers in California need to have more cash on hand, said Ralph McLaughlin, housing economist at Trulia. “It would take a lot longer for a homebuyer to break even from the costs.”

On the other side, buying tends to provide more financial favor to those in the South. Sarasota, Fla., offers the biggest edge to buyers where it’s 55% cheaper to buy than rent this year, according to the report.

But just because it’s cheaper, doesn’t mean people are flocking to become homeowners. The homeownership rate fell to 63.7% in the first quarter of 2015, according to Census.

Saving for a 20% down payment is a big obstacle, McLaughlin, said. “Even though we are a few years out of the recession, it can still take quite a while to save up for a down payment, especially when rents are high.”

Low mortgage rates are a key factor in the calculations, and if rates start to rise, some markets could see a shift toward renting, according to McLaughlin, particularly San Jose, Lancaster and Honolulu.

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