Is buying a home cheaper than renting? In the nation’s 100 largest metro areas, buying is, on average, 38 percent cheaper than renting your home according to Trulia. Rising mortgage rates and home prices have begun to narrow the gap over the past year, although interest rates have recently dropped and the housing price growth is beginning to slow down.
To show the disparity between buying versus renting across the country, Trulia has created an interactive map that takes into consideration the rate you can get on a 30-year fixed-rate mortgage, your income tax bracket and how long you plan to stay in the home. Using these factors, the map will show you how much cheaper it is to buy than rent in 100 major metro areas.
Every city has its own rent-versus-buy ratio, as buying ranges from being just 13 percent cheaper in San Francisco, while it’s 52 percent cheaper in Atlanta. But, no matter which city you are looking to purchase in, the cost of buying compared to renting really depends on how much home prices rise, or perhaps even fall, after you buy. Trulia’s map assumes conservative home price appreciation, and although everyone is painfully aware of how home prices can suddenly change, it focuses on how different scenarios can affect the math for someone deciding to buy or rent in today’s market.
Low mortgage rates have been the primary factor that has kept buying cheaper than renting, even as home prices rose dramatically. However, if mortgage rates continue to climb, each metro area will have what Trulia describes as a “tipping point,” or a point when buying a home is no longer more economical than renting a home. For example, Honolulu, Hawaii will be at its tipping point when rates reach just five percent. But in St. Louis, Mo., where the cost of buying is 54 percent cheaper than renting, the tipping point is not reached until mortgage rates hit a whopping 17.7 percent.
Overall, it is still a great time to buy a home in metro Atlanta. As the housing market moves towards its equilibrium, home prices will balance out and mortgage rates will remain steady, meaning that it will likely remain cheaper to purchase a home than to rent in most major markets across the United States. To read the full rent versus buy report from Trulia, click here. To view the interactive map, click here.