(5/9/2011) - It's time to dust off and crank up that rent-vs-buy
calculator.
The housing market is mixed with some areas offering homes to buy that
are cheaper than renting. Other markets yield better deals in the rental
sector.
Trulia's Second Quarter 2011 Rent vs. Buy Index compares
the cost of buying and renting a two-bedroom apartment, condominium or
townhouse in the 50 largest U.S. cities and found buying a home has become
more affordable than renting in nearly four out of five major cities.
On one hand, the growing level of distressed housing has helped push home
prices down by a "double dip"
factor to levels not seen in more than a decade. Low mortgage interest rates
are also cooperating.
Trulia says buying a home is a better deal in Las Vegas, NV;
Phoenix, AZ; Arlington, TX; Fresno, CA; Miami, FL and Mesa, AZ among other
cities.
Even with home buying affordability better than it's been in years,
unemployment remains high and qualifying for a mortgage is so tough rentals are feeling the pressure of displaced
demand.
Renting is a better deal in New York City, NY; Fort Worth, TX; Kansas
City, KS; Los Angeles, CA; Memphis, TN; and Seattle, WA, among others,
according to Trulia.
The National Multi Housing Council's (NMHC) latest Quarterly Survey of Apartment Market Conditions for
the first quarter this year found the "Market Tightness Index," at 90, as
high as it's ever been.
The survey polls more than 100 CEOs and other senior executives of
apartment-related firms nationwide and found that almost four in five
respondents (79 percent) said markets were tighter (lower vacancies and/or
higher rents) and -- for the first time ever -- not a single respondent
thought conditions were looser.
"These results show the apartment industry continues to do well even
though the nation's overall rate of economic growth has slowed. This is
driven largely by the increased appeal of renting generally but also by the
large number of young people entering the housing market for the first time
-- and young people are much more likely to rent than buy," said NMHC Chief
Economist Mark Obrinsky.
For those going the rental route, a long term lease that locks in the
monthly rental payment is the better deal because demand for rental housing
is expected to increase, says Bruce Hahn, president of the American Homeowners
Foundation.
"Boomerang kids, children who were forced to move back in with their
parents, will be looking for their own place as they find jobs. Most don't
have much in savings, and since lenders are requiring larger down payments
these days, buying is not an option for most of them," says Hahn.
There's also a multi-generational movement among
families and groups sharing to save money on housing purchased or
rented.
She says as rents continue to increase and owner-occupied housing prices
continue to fall or remain flat, for-sale housing markets will begin to look
more attractive. Many tenants simply cannot afford a rent increase, and
will choose to downgrade the quality of their housing or take on
roommates.
Deutch says, as housing rents rise, housing markets with high
single-family vacancy rates provide some competition for the rental sector.
States with high vacancy rates include Nevada, Florida, Michigan, Georgia
and Rhode Island.
Because the rent-vs-buy calculation varies by locality, consumers need to
compare costs where they plan to buy or rent.
Several calculators can help.
• Erate.com's "Rent vs. Buy Calculator" is a
down-and-dirty quick comparison of rent, insurance, and expected rate of
rental increases vs. home buying costs, property tax costs, upkeep costs,
insurance and selling costs, but also appreciation. Use this calculator as a
starting point, to quickly determine which type of housing is best for
you.
• Realtor.com's "Rent or Buy"
calculator tosses in more variables, including the real estate agents
commission, rate of inflation and homeowner association dues (if any) to
get you even closer to a real comparison. Use this calculator to hone in on
what housing is best for you.
• Federal Reserve Bank of Cleveland's "Buy a Home or
Rent?" calculator is really a worksheet that provides a host of
variables many calculators don't consider. Produced by O. Emre Ergungor, a
senior research economist and Saeed Zaman a senior economic analyst, both in
the fed bank's research department, this calculator is for those who are
financial planning nit-pickers who want to get closer to the absolute
rent-vs-buy bottom line.
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