Cheaper to Buy than Rent in Most Metropolitan Areas, Study Shows

By Kyle Chezum Updated on 1/24/2011

1/24/11

The debate is ongoing as to whether it’s cheaper to buy a home or rent one, but for the moment, at least, buying seems to have won the day.  Recent economic tangles have made homes more affordable and more readily available than in recent memory, while job instability and other financial factors have led to increased demand for rentals.

Real estate data firm Trulia conducted a study of home purchase prices and rental rates in 50 major cities.  The results?  At present, it’s cheaper to buy than rent in 72% of major metro areas.  Some of the cities that ranked high for home purchase affordability included Miami, Phoenix, and Sacramento, all surprising contenders with histories of high property values.

Two ongoing market events created this unique housing situation.  Record foreclosures and declining property values have supplied the market with an excess of homes available for purchase, while the surplus of evicted homeowners and new residents hesitant to buy has driven up rental demand.  According to RealtyTrac, Miami and Las Vegas saw the highest foreclosure rates.  In Las Vegas, nearly on e in every 25 homes has received a foreclosure notice, and Miami has seen tens of thousands of foreclosures since the beginning of the financial crisis.

But buying doesn’t beat out renting in every market.  New York, Seattle, and San Francisco were among the metropolitan areas where renting was cheaper than buying, and several other major areas, including Los Angeles, Oakland, and Portland, returned ambivalent results.  In these areas, purchase costs and rental costs held a rough balance.  Overall, though, renting was only cheaper than buying in 8% of major metros.

For additional information, read through Trulia’s full summary of the data.