Thanks to nationwide price declines and rising rents, buying a home is now cheaper than renting one in 98 of the nation’s 100 major metropolitan areas, according to a rent vs. buy index from real estate search and marketing site Trulia.

In the two remaining metros, San Francisco and Honolulu, renting often beat buying, but buying could be a better deal for those who plan to stay in their home for at least five years and take advantage of the mortgage interest tax deduction, Trulia said.

The rent vs. buy index is based on a price-to-rent ratio of asking prices to asking rents for properties on between Dec. 1, 2011 and Feb. 29. 2012, after adjusting for property and neighborhood attributes, the site said.

A price-to-rent ratio of 15 or below indicates it is less expensive to buy than to rent in an area; a ratio of 20 or higher indicates renting is less expensive than buying; and a ratio between 15 and 20 indicates buying could be cheaper than renting depending on individual circumstances, including tax considerations.

Of the 10 metros with the lowest price-to-rent ratios, eight were in the Midwest, including six that were in either Michigan or Ohio.

Rank U.S. Metro Price:Rent Ratio
1 Detroit 3.7
2 Oklahoma City 4.3
3 Dayton, Ohio 4.8
4 Warren-Troy-Farmington Hills, Mich. 5.4
5 Toledo, Ohio 6
6 Grand Rapids, Mich. 6.1
7 Cleveland 6.2
8 Atlanta 6.5
9 Gary, Ind. 6.7
10 Memphis, Tenn.-Miss.-Ark. 6.8

Source: Trulia

"Metros where homeownership is expensive tend to have stronger long-term economic growth and little room to build new homes, like Boston and the San Francisco Bay Area, where people expect home prices to increase over time," said said Jed Kolko, Trulia’s chief economist, in a statement.

"Buying is much cheaper than renting in slow-growing places with high vacancy rates and land to spare, like Detroit and Cleveland, where prices are unlikely to improve much in the future."

Of the 10 metros with the highest price-to-rent ratios, eight are in the West, including five in California.

Rank U.S. Metro Price:Rent Ratio
1 Honolulu 17
2 San Francisco 15.5
3 New York 14.5
4 San Jose, Calif. 14.3
5 Orange County, Calif. 13.5
6 Los Angeles 13
7 San Diego 12.7
8 Colorado Springs, Colo. 12
9 Boston 12
10 Albuquerque, N.M. 11.9

Source: Trulia

In a closer look at the New York City metro, Trulia found, not surprisingly, that Manhattan had the highest price-to-rent ratio among surrounding boroughs and counties. Renting was also relatively cheaper than buying in Brooklyn and Staten Island "where priced-out Manhattanites have bid up home values," the site said.

New York City Area
Borough or County Price:Rent Ratio
Manhattan 20
Brooklyn 15.7
Staten Island 15.3
Queens 13.6
Bergen, N.J. (Hackensack) 12.5
Hudson, N.J. (Jersey City) 12.1
Nassau, N.Y. (Long Island) 11.8
Bronx 10.9
Westchester, N.Y. 9.3

Source: Trulia

In the San Francisco Bay Area, San Francisco County (which is one and the same as the city) had the highest price-to-rent ratio, followed by Santa Clara and San Mateo counties, both home to Silicon Valley. In all but San Francisco County, buying was less expensive than renting.

San Francisco Bay Area
County Price:Rent Ratio
San Francisco 17.2
Santa Clara (San Jose) 14.5
San Mateo 14
Alameda (Oakland) 12.1
Contra Costa 10.8

Source: Trulia

An area’s price-to-rent ratio can change when the number of bedrooms a home has are considered, Trulia found. In general, larger homes had higher price-to-rent ratios, so renting a home with three or more bedrooms could be cheaper than buying one in certain metros, including San Francisco and New York.

U.S. Metro Price:Rent Ratio
  1 Bedroom (includes studios) 2 Bedrooms 3+ Bedrooms
New York 13.7 14.7 15.9
Los Angeles 11.6 12.5 14.1
Chicago 7.1 8 8.5
San Francisco 13.1 14.8 18.2
Washington, D.C. 9.9 9.9 12.6
Miami 9.5 10.1 10.4

Source: Trulia

Trulia has created an interactive graph that shows index values for all 100 metro areas.

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