Homeownership Makes $ense

Bring on the buyers! At last, the housing market is beginning to make sense again. The ownership line is finally crossing over the rental line on the great Homeownership graph.
It is now more expensive to rent than to buy a home in 72% of major metropolitan areas across the US, according to the Trulia Rent vs. Buy Index released Monday.

This is due to rising demand for rentals and falling home prices combined with low interest rates.

Pete Flint, chief executive and co-founder of Trulia says: "Since the start of the Great Recession, many former homeowners have flooded the rental market? Following the principles of supply and demand, renting has become relatively more expensive than buying in most markets."

The index compared the median list price and rent paid for a two-bedroom home in 50 cities. It then assigned a price-to-rent ration to each city with 15 signifying a buyer's market and 21 or more signifying a renter's market. The space between the two numbers signifies a balanced market.

The cost to rent includes rent and insurance. The cost of ownership includes mortgage principal and interest, closing costs, property taxes, hazard insurance and any homeowner association dues.

Not surprising, the most affordable markets are Las Vegas and Miami where the price-to-rent ration is 6 and where the foreclosure rates have topped the charts. Las Vegas was atop the foreclosures list in Q3 with one in every 25 homes was in foreclosure.

The index reported that homeownership was cheaper in the metro areas of San Francisco, Seattle, New York and Kansas City, MO, all of whom had price-to-rent ratios over 21.

Other metros like Oakland, Sacramento, Los Angeles, Miami and Phoenix are experiencing elevated rates of unemployment or foreclosures and close economic centers with projected job growth are still more affordable to renters.

This is truly great news for the Housing Industry.

But I say not so fast. Where are the jobs? Less people are also in a position to buy a home. Not to mention the millions of foreclosures that haven't come onto the market yet. This will most likely keep the inventory high and still drive prices down further, but how much? And if they is the case, we will need to see interest rates remain low if any major impact could be expected. It will be interesting to see what the Fed does and how this will all play out. But those who can afford to buy, you should take advantage of this situation while all the factors are still in your favor.