Earlier in the year, home buying was still considered to be the more pricey route to go when compared with renting in most parts of the Bay Area.  But the tables seem to have turned recently, as both the buying and rental market have heated up all around the bay the last few months.

Real estate site Trulia recently dug into data on both rental prices and homes for sale across the U.S. in the months of June, July and August and based on their analysis, it’s cheaper to buy than to rent a comparable property everywhere in the U.S., including the bay area.

In the San Francisco metro area, it was 28% cheaper to buy than rent.  It was 31% less expensive to be a homeowner in the San Jose metro area and in the Oakland metro area, a homeowner would save 41% over renting.

Courtesy of Trulia.com

Trulia’s report made several assumptions:

Cost of homeownership assumes that the home is sold after 7 years and includes closing costs, maintenance, insurance, property taxes and other costs. Cost of renting includes security deposit and renters insurance. Monthly cost is based on net present value of costs over 7 years. Monthly costs are based on the average across all properties listed in the metro area, including those for sale and those for rent, in summer 2012.

They also assumed that a homebuyer was able to secure a 3.5% mortgage rate, was in the 25% tax bracket and was able to put a down payment of 20%.  Any change in these assumptions, such as having a higher mortgage rate, a lower tax bracket and selling sooner could significantly change the outcome.  With a mortgage rate of 4.5%, being in the 15% tax rate and only a 3 year window, the tables turn once again and it is 28% cheaper to rent than to buy in the SF metro area.

And while buying may be the way to go in the long run, many are held back by the difficulty in saving for that 20% down payment (especially in the bay area where homes are pricey) and you’re much less flexible in relocating once you’ve got a mortgage.

You can play around with different assumptions on Trulia’s fun interactive infographic here to see what how your particulars work out.  Is it better to rent or buy for you?

Article source: http://blog.sfgate.com/ontheblock/2012/09/19/what-its-cheaper-to-buy-than-rent-in-the-bay-area/

Typically when rents go up, more renters turn to home buying.

When home prices go up, more turn to renting, but today’s housing market is anything but typical.

Rents were up 3 percent nationally in January, year-over-year, according to a soon-to-be released new rental index from Zillow.com. Home prices, however, were down 4.6 percent annually.

When you look locally, the numbers are more dramatic.

In some markets, rents rose almost as much as home values fell. Take Chicago, for example, where rents were up just over 9 percent annually while home values were down just over 10 percent. The same is true for Minneapolis, where the divide is nearly the same. In San Francisco and Detroit, rents are up around 5 percent while home prices are down the same. It begs the question, as the rent vs. own divide grows, will the rental bubble suddenly burst?

Right now investors are rushing to get in on cheap foreclosures, hoping to turn them around for quick rental income. The regulator of Fannie Mae and Freddie Mac, the FHFA, is in the midst of a pilot program to sell 2500 foreclosed properties to investors as rentals. The bulk of these properties are already rented, which means buyers get a turn-key investment with instant returns.

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