Those interested in buying a home, especially first-time buyers, are struggling with question of whether it is more financially smart to buy or rent. The cost of owning real estate in cities such as Boston, Los Angeles, San Francisco, Seattle, Portland, and Oakland is more expensive than renting. However, according to Trulia.com, it may make more financial sense to buy anyway. The Q2 2011 Rent vs. Buy index was recently released by Trulia.com. This index compares the cost of buying and renting 2-bedroom apartments, condos, or townhouses in the 50 largest cities in the U.S. In this quarter, buying a home has become more affordable in 80% or 4 out of 5 of the major cities. However, Boston real estate ranked 3rd with a rent-to-buy ratio of 19 in the 2nd quarter. A ratio in the range of 16-20 means that the cost of owning a home is more than renting.
Does this mean you shouldn’t consider purchasing Boston real estate?
Not necessarily! Ken Shuman of Trulia says, “With home prices nearing a double dip and more foreclosures expected to flood the housing market over the next two years, the decision between renting and buying a home across most of the country has clearly moved in favor of buying. As we head into the summer buying season, those looking to buy a home should be encouraged by improvements in the market and feel optimistic about their chances of finding an affordable home, much more so than in previous years.”
He later added, “Aspiring homeowners should focus their energies on locking down a low mortgage rate sooner than later. While home prices are unlikely to return to pre-crash levels, today’s low interest rates will likely rise thanks to inflation and spikes in the Fed rates. As the government wind downs its role in the mortgage markets higher mortgage interest rates will be inevitable.”