That’s right! Even with increasing housing value it’s still cheaper to buy, pretty much across the board. Home prices have been on the rise in 2013 but rents are still high in California and across the nation. Trulia’s March 2013 Rent vs. Buy Report shows that buying a home in the top 100 metropolitan markets is still less expensive than renting, demonstrating just how expensive renting can be. Trulia’s interactive map allows you to graphically access the report’s results and is quite informative and fun. It shows that even with a loan at 5.5%, San Francisco is the only market where it would be cheaper to rent if you stayed in your home for 7 years.
Rent Continues to Increase Nationwide
So why is it still cheaper to buy than to rent if housing prices have been increasing steadily? Because most people are still renting. The Zillow Rent Index shows consistent increases in rents in California, Sacramento, and San Francisco, among many others, over the past two years. Would-be homebuyers wary of the economy and the housing market are opting to rent. This is helping drive up the cost of renting nationwide. Large metropolitan cities like nearby San Francisco and Oakland have been hit particularly hard by increasing rental prices. It seems like the shadows of the housing crash are still looming over us as buyers’ fears of a second downturn continue to have unexpected effects on the housing market.
It’s not just the big cities feeling the squeeze. In some cases the average rental price in Placer County for a 2 bedroom unit rivals prices in San Francisco County. While residents of San Francisco may find themselves with no other options, as housing prices remain relatively high in the city, renters in Nevada and Placer County do have another attractive opportunity. With the allure of affordable housing prices, cities such as Roseville, Rocklin, and Granite Bay are likely to see an increase in home purchases as many buyers’ worries are quickly overshadowed by the weight of their monthly rent payments.
Higher rents mean it’s a good time to be a landlord as well. If you are looking to purchase a second home as an investment property, now is an excellent time. With a low interest rate on a mortgage and the ability to earn top dollar from tenant rents, it is easier to see greater returns from an investment property.
Stop throwing your money away on Rent!
Today’s housing market has a lot going for it: increasing rents, record low interest rates, drastically reduced down payments, and (most importantly) reasonably priced homes. The latest CoreLogic Housing Price Index reports housing prices are still more than 20% below their pre-bubble peak. Regardless of what the market is going to do tomorrow, the conditions today are hard to ignore. Going back to Trulia’s interactive Rent vs. Buy map, we can see that with a 4.5% mortgage and five years invested in a home it’s 22% cheaper to buy a home than it is to rent in the Sacramento Metropolitan Area. That is hard to ignore.
The next quarterly Rent vs. Buy report is due out soon. Will average rental prices continue to climb or will increased demand in the sales market finally start to slow the increasing cost of rent?
Mary Pizzimenti, California Realtor ®