Hello friends and clients,
Per Trulia and the Austin Business Journal, here is some rent v. buy analyses on our local level. Contact me if you are looking to buy a home, sell your home, or invest in additional real estate.
Keller Williams Realty
To buy or not to buy? Trulia says yes in Austin and most places in the country
Jan Buchholz Staff Writer- Austin Business Journal
In Austin — even with the dynamic appreciation in home values that has continued for the past two years — it’s 30 percent cheaper to own than rent. That’s the assessment of Trulia, the national real estate Web portal and research company.
In fact in every major U.S. market it’s still cheaper to buy a house than rent over the long term — an average of 38 percent cheaper.
Here’s a link to Trulia’s latest “Rent vs. Buy” report. That statistic, however, assumes a 20 percent down payment on a 30-year loan and a few other factors.
For many first-time homebuyers a 20 percent down payment can be an almost impossible stretch, especially given that the average home price in Austin is $308,514, according to the latest market report by the Austin Board of Realtors. Complicating the local landscape is the fact that land prices across the Austin area are fetching a premium, creating a nearly impossible scenario for homebuilders that would like to provide an inventory of starter homes but just can’t make the numbers pencil out.
The issue of first-time homebuying isn’t exclusive to Austin. It’s a problem everywhere and there may be other cultural factors at play, as Jed Kolko, Trulia’s chief economist points out.
“For a millennial with little savings and no Bank of Mom and Dad, an FHA loan might be the only option. If our hypothetical twentysomething is not in a tax bracket that makes itemizing worthwhile and only stays put five years — those young people are restless — buying ends up costing more than renting in 27 of the largest metros,” Kolko said. “Those 27 include not only pricey coastal markets but also markets like Phoenix, Las Vegas and Colorado Springs.”
And presumably Austin, where the robust young population might not want to leave the city ever but also might not want to stay put very long in the same neighborhood.
The gap between renting and owning is more pronounced in other Texas markets. In Houston it’s 43 percent cheaper to buy, and almost the same in Dallas at 42 percent. In San Antonio the gap is 38 percent.
Consider this: In Detroit the gap is the widest and most striking. It’s 63 percent cheaper to own there than to rent. The gap is smallest in Honolulu at just 17 percent.
By regions, the gap is largest in the Midwest and South, and much smaller in large metro areas in New York and California.
Another interesting statistic from Trulia’s report is that the tipping point for whether to buy or rent in Austin would be if mortgage interest rates hit 8.9 percent — not a likely scenario at the moment, though most real estate experts around the country expect interest rates to rise in 2015 from historical lows.