Trulia: Homeownership Beats Renting Costs by 40%

Owning a home is still vastly less expensive than renting, netting Americans nearly 40% in savings among those who own their homes versus renting, according to online real estate hub Trulia

Nationally, and in all of the 100 largest metro areas, homeownership remains cheaper than renting, Trulia’s chief economist writes in a recent blog post, with rising mortgage rates and home prices narrowing the gap in the last year. 

Buying today is 38% cheaper than renting on a national basis today, Trulia finds, versus being 44% cheaper a year ago. 

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Geographically, the gap varies, however, with homeownership being just 5% cheaper than renting in Honolulu and as high as 66% cheaper than renting in Detroit. 

Trulia also calculated “tipping points” at which the mortgage rate will make ownership more expensive. In Orange County California, for example, at today’s values that tipping point is 6.8%, whereas in Cleveland, it’s nearly 21%. 

“Will renting become cheaper than buying soon?” Trulia asks. “Some markets might tip in favor of renting this year as prices continue to rise faster than rents and if – as most economists expect – mortgage rates rise, due both to the strengthening economy and Fed tapering.”

View the rent versus buy analysis from Trulia.

Written by Elizabeth Ecker

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  • The study fails to stratify its findings by economic income. By doing that it fails to ignore the relative higher net costs of first time home buyers versus renting in coastal California. Well heeled landlords in California can afford to compete with the costs of homeownership since they are not simply to cash flow to earn their return on investment. For decades in California the costs of renting were lower than those related to owning a home.

    What drives homeownership along coastal California is the growth in home values. It would be rare for a first time home buyer in California to be in relatively high income tax brackets increasing the net costs of homeownership.

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