Real estate search site Trulia has launched an index that compares average list prices and rents in the 50 biggest cities in the United States, the site announced Thursday.
The site calculated price-to-rent ratios for two-bedroom apartments, condominiums and townhomes in the 50 most populous cities in the country. Cities in states where foreclosure rates have been high top the list of places where it’s better to buy such a property than to rent it.
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"At the peak of the real estate bubble, cities like Miami, Phoenix and Las Vegas were not affordable for many. Now the opposite is true," said Pete Flint, Trulia’s co-founder and CEO, in a statement.
"Home sellers in these hard-hit areas are forced to lower their prices to compete with all the foreclosures on the market. As a result, these unattainable markets are so affordable it makes better financial sense to buy than rent."
Minneapolis, Minn., is at the top of the buy-vs.-rent list with an average list price of $153,844 and an average rent of $1,700. No. 2 on the list is Arlington, Texas, with an average list price of $72,422 and an average rent of $789. Next was Miami with an average list price of $189,566 and an average rent of $2,019.
According to Trulia, calculations for the total cost of homeownership include mortgage principal and interest, property taxes, hazard insurance, closing costs at time of purchase, homeowners association dues and private mortgage insurance. The homeownership cost calculation also includes tax advantages from mortgage interest, property tax and closing-cost deductions.
Calculations for renting costs include rent and renters insurance, the site said.
Top 10 Cities to Buy vs. Rent
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City |
Price-to-Rent Ratio |
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1. |
8 |
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2. |
|
8 |
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3. |
8 |
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4. |
8 |
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5. |
8 |
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6. |
9 |
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7. |
|
9 |
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8. |
10 |
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9. |
10 |
|
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10. |
11 |
(Source: Trulia)
According to the site, a price-to-rent ratio of 1 to 15 means that it’s much cheaper to buy than to rent in a particular city. A ratio between 16 and 20 means that it’s more expensive to rent than to buy, but, depending on the situation, buying could "make financial sense," the site said. Any ratio above 20 indicates that owning is much more costly than renting in a city.
Not surprisingly, New York topped the list of cities where it is better to rent a two-bedroom unit; the average list price is $1,383,612 and an average rent is $3,538. Omaha, Neb., was next with an average list price of $275,844 and an average rent of $870. No. 3 was Seattle, Wash., with an average list price of $461,330 and an average rent of $1,546.
Top 10 Cities to Rent vs. Buy
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City |
Price-to-Rent Ratio |
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1. |
33 |
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2. |
26 |
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3. |
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25 |
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4. |
22 |
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5. |
22 |
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6. |
21 |
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7. |
20 |
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8. |
|
20 |
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9. |
20 |
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10. |
19 |
(Source: Trulia)
"It is not a surprise to see cities like New York and San Francisco on the ‘Rent’ cities, but I was surprised to see areas like Omaha, Oklahoma City and Kansas City on our rental list," Flint said.
"We’re not suggesting that it’s unwise to buy in these areas though — just that it’s significantly more expensive than renting. In many of these cities, even though homebuying is much more costly than renting, prices are still much lower than they have been in a long, long time."
The company currently has no plans to expand the index to other property types or sizes or to break the index down further by neighborhood, according to a Trulia spokesperson. Trulia added rental search to its site in April.
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