Real Estate Marketing & Beyond
The cost of owning a home is now at its lowest point for 15 years, and is often less expensive than renting. A recent survey for the Wall Street Journal found it was more expensive to rent than buy a median priced property in 12 metro areas, even when taking into account taxes and insurance.
Renting a place these days often costs more than buying does, yet that hasn't helped housing markets much. © Stephen Coburn - Fotolia.com
This should be boosting the housing market, but buyers remain unwilling to commit to a mortgage or unable to qualify for one, with the legacy of the recession still holding fast. Atlanta is one of the areas where values are most favorable for owning compared to renting, with the monthly repayments on an average property being just $539 provided the homeowner can put down a 20% deposit. This compares to an average rent of $140.
According to economists and real estate agents this high affordability isn't enough to kickstart the housing market, especially as some homeowners would love to move up to larger properties but cannot sell their houses. Others are worried about the additional costs involved with owning a home, including maintenance and homeowner association dues. Additional problems include not having enough equity or being unable to qualify for a mortgage. Those who are able to qualify and who could actually afford to buy a property are proving to be cautious in a market where weak job growth and foreclosures could cause further price falls.
Cities where it is cheaper to buy than rent include Orlando, Las Vegas, Miami, St Louis, Detroit, Minneapolis, Phoenix and Chicago. Rental values are also expected to rise by around 4% this year, and this is boosting affordability in those cities where it is still cheaper to rent than buy. San Diego is a prime example as the monthly cost of home ownership has been an average of 83% more expensive than renting over the past 20 years, but during the third quarter owning a home was just 22% more expensive than renting.
Mortgage rates are one reason why affordability is so high, but the Federal Reserve is expecting to keep rates low for the next two years so would-be buyers feel no urgency to purchase, especially as affordability could improve even more during the coming months.
