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Swee Ng
Trulia: Most foreclosure hot spots see price-to-rent ratios drop
By Inman News
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:
Rank City State Price-to-rent ratio
1 Las Vegas, NV. 6
2 Detroit, MI 7
3 Mesa, AZ 7
4 Fresno, CA 7
5 Arlington, TX 8
6 Sacramento, CA 8
7 Phoenix, AZ 8
8 Jacksonville, FL. 8
9 San Antonio, TX 10
10 Tulsa, OK 11
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