It is more affordable to buy a home than rent one these days, according to real estate data search engine Trulia, but many U.S. consumers are not taking advantage of the opportunity.
Trulia reported that in 98 of the top 100 housing markets, buying makes more financial sense than renting. (The only two housing market outside the trend are Honolulu and San Francisco. )And rent prices look to be continuing their rise for the near future, while home prices are very near bottomed out. Plus, mortgage interest rates remain at historic lows, all combining to make it a great time to buy.
Detroit has top honors as the market where it is most affordable to buy, as it is only 3.7 times more expensive to buy than to rent. The next most affordable areas are Oklahoma City, Dayton, Ohio, Warren, Mich. and Toledo, Ohio.
Compare that to San Francisco, where buying studios and one-bedroom apartments are 13.1 times more expensive than renting. The difference is location and availability of land, according to Jed Kolko, chief economist for Trulia.
“Buying is much cheaper than renting in slow-growing places with high vacancy rates and land to spare, like Detroit and Cleveland, where prices are unlikely to improve much in the future,” he said as quoted in a CNN Money article.
Still, very few Americans are really jumping in to buy at this point. According to the Mortgage Bankers Association, mortgage applications have declined 2.8 percent over the past four weeks. Despite rock bottom interest rates, potential borrowers are having a hard time qualifying for strict mortgage requirements these days, among them higher down payments and credit scores. And rent itself is a stumbling block for many.
“Rising rents make it harder for people to save for a down payment, which is the biggest barrier to buying a home that aspiring homeowners face,” added Kolko.
Buyers may not return in strong numbers to the housing market until real progress is made in home prices and credit standards start to ease.