With Housing Prices Spiking Everywhere.
Is It Cheaper/Smarter To Rent or Buy?

To buy or not to buy?

That is indeed the age-old question for renters who are flirting with the idea of homeownership amid fast-rising rental prices. But in today’s wild and scary housing market—where prices seem to have no ceiling, mortgage rates are once again climbing, and the number of homes going up for sale is paltry—the answer is a bit more complicated than usual. 

Those renewing their leases are often slack-jawed as they’re confronted with steep, double-digit rental hikes—a huge change from just a year ago, when landlords were eagerly giving away concessions such as free months of rent to fill up their buildings. Rents surged more than 19% in the 50 largest markets over the past year, according to the latest data from December from Realtor.com®.

That’s even more than the increase in for-sale home prices.

So does it make more sense to buy a home and lock in fixed housing costs before prices and mortgage rates rise even further?

Or should folks continue renting while they wait for the seller’s market to (potentially) come back down to Earth? Conventional wisdom has suggested that it almost always makes more financial sense, at least in the long term, to buy rather than rent.

But is that still true today?

As is so often the case these days, it all depends on where you live.

So the Realtor.com data team took a deep dive to find the places where it could make more financial sense to become a homeowner—and where it could be cheaper to remain (or become) tenants.

Spoiler:

It still makes sense to buy in about three-quarters of the 100 largest metropolitan areas, according to our analysis. The median list price for homes for sale across the country was $375,000 in December, with the median mortgage payment averaging about $1,407 a month in the 100 largest metros. (This assumes buyers put down 10% and does not include property taxes or home insurance.)

While that’s not anything to sneeze at, it’s considerably less than the $1,651 monthly median rental payment. And, of course, homeownership has the big added bonus of building equity.

It’s often easier to purchase in the Midwest and South, which tend to have lower-priced homes, if folks can muster up a down payment. That can mean a monthly mortgage payment is less than a rent bill. Meanwhile, it can be better to rent in pricier, emerging tech hubs and established ones in coastal California—unless money is no object.

“Places where it’s better to rent tend to have much higher-paying jobs, and as a result of that, both home prices and rents are going to be elevated—but home prices much more so,” says George Ratiu, manager of economic research for Realtor.com. That means these places have a high barrier to entry for buying homes.

Home prices have risen significantly since the start of the COVID-19 pandemic, as buyers flush with savings were able to make the move to become homeowners.

Meanwhile, in part because of a national eviction moratorium and partly due to underbuilding, vacancy rates in rentals have reached the lowest level since at least the 1980s, according to the St. Louis Federal Reserve. That means more people are vying for fewer units, making them more costly.

“Last year we saw really pretty staggering rent growth,” says Chris Salviati, senior housing economist at Apartment List.

According to the rental listing website’s rent index, rents jumped 18% in 2021.

“That level of rent growth is not something we had experienced at any time in recent pre-pandemic history,” says Salviati.

To come up with our rent versus buy list, we looked at the median rents of homes in the 100 largest metropolitan areas. (We evaluated all rentals, whether or not they were one-bedroom apartments or four-bedroom houses.) We then looked at the median home prices in those 100 places and calculated the monthly cost of buying with a 30-year fixed-rate mortgage. We did not include other costs that come with homeownership, such as taxes and insurance. Here’s what the data shows:


1. Fort Myers, FL

Median home price in December: $444,450
Monthly payment (with 10% down and a 3.5% mortgage rate): $1,796 
Median rent: $4,005

Located on Florida’s southwest coast, the Fort Myers metro, which includes Cape Coral, has long been a popular destination for vacation-home buyers and seniors. They’ve been attracted by the warm weather and reasonably priced housing stock. (The median home price here was $50,000 less than in Miami last month.)

With 400 miles of canals here, potential homeowners can find plenty of places with water access for boating and fishing. But a massive hurricane a few years ago turned the water toxic with foul-smelling algae blooms, a big turnoff for buyers. That’s kept home prices comparatively low here, while inventory isn’t as sparse as other places in the country.

Since then, the Army Corps of Engineers has implemented a water filtration system and prices have started to rise again.

Meanwhile, people who bought homes here before the Great Recession and rented them out have decided to sell, leaving a dearth of affordable rentals, says Mike Lombardo, a broker with Old Glory Realty.

“Even if you wanted to rent something, the probability of getting a rental is pretty low,” Lombardo says.

Buyers looking for a slice of the Florida lifestyle can get a remodeled three-bedroom home with a pool for $375,000.


2. San Antonio, TX

Median home price: $347,250

Monthly payment: $1,414

Median rent: $3,178

With miles of sprawling, flat land and few regulations for builders, this south-central Texas city has seen new homes popping up at a rapid pace. Even older homes that may need updates are being torn down to make room for new abodes.With lots of places to choose from, competition isn’t nearly as fierce here as in Austin, an hour and a half away. And home prices here are reasonable compared with much of the rest of the country. But of course, affordability is relative to how much people make, and the city’s median household income was about $52,000, according to U.S. Census data.A newly built, 3 Bed home close to Lackland Air Force Base, a big employer in the area, was recently listed for just $255,000.


3. Scranton, PA

Median home price: $175,000
Monthly payment: $715
Median rent: $2,156

Like a lot of Rust Belt cities, this former coal and industry town has seen its share of struggles over the years, including nearly going bankrupt in 2012. But lately, Scranton has been attracting buyers looking to escape pricey cities in the Northeast, including remote workers looking to settle somewhere more affordable.Just two and a half hours from New York City, Scranton surprises many transplants with its low home prices and property taxes. While prices have increased since the start of the pandemic, homes in this city made famous as the home to (fictional) paper company Dunder-Mifflin on “The Office” remain a good opportunity for first-time buyers.A cute, yellow 3 bedroom house in need of some cosmetic updates is on the market for just $100,000.


4. Riverside, CA

Median home price: $549,500
Monthly payment: $2,220
Median rent: $3,010

About halfway between Los Angeles and Palm Springs, Riverside offers a far cheaper alternative to both. Buyers here can get more space than they would get in downtown L.A., but it’s close enough that they don’t have to give up all the amenities. (Riverside is within driving distance of Disneyland, mountain skiing, and Orange County beaches.) Homes can sell for less than half of the median price of a home in the L.A. metro area, which has made this a popular spot for first-time and younger buyers.On top of that, rents are getting more expensive. Riverside recorded one of the biggest rent spikes in the country, according to the latest rental data from Realtor.com—growing by about 30% since last year. That makes the area more appealing to those who want to lock in how much they’re paying on housing each month with a mortgage payment.


5. New Haven, CT

Median home price: $329,900
Monthly payment: $1,311
Median rent: $2,050

After decades of economic decline, New Haven has been on the up and up for the past couple of years.

Home to Yale University, this college town has plenty to offer newcomers, whether they’re taking in a show at the internationally regarded Yale Repertory Theatre or snacking on the city’s famed clam pizza (four words: Frank Pepe Pizza Napoletana). It’s also about a two-hour train ride from New York City, if you’re craving a more traditional slice.

With lots of homes at affordable prices to choose from, buying is a strong option here. A recently listed three-bedroom, Cape Cod-style home is on the market for $275,000.

Rounding out the top10 metros where it’s better to buy are Rust Belt cities St. LouisClevelandBuffalo, NYDetroit; and Chicago.


Article source {Realtor.com}

#TimeToBuy is NOW! #LanaCole #ILRealtor