Real Estate website, Trulia, has developed an index to advise consumers whether it is more cost effective to rent or buy a home. As with most data from the big RE sites like Trulia and Zillow, the index is based more on company-defined stats and algorithms than any subjective, boots on the ground, local input.
Here is Trulia’s Interpretation key:
Trulia.com’s 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.
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.
Memphis’ Price-to-Rent Ratio is 18.
View the entire Rent vs Buy report for 50 Top cities.
It seems kind of strange to be posting about the benefits for renting vs. buying, since my business is SELLING real estate, but given the economy, the state of the housing market, and the White House’s push to eliminate the homeowner mortgage tax deduction, more and more consumers are weighing the value of home ownership today.
I would love to hear your comments!
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What do you think? Leave your comments.