Home price gains may be outpacing increases in rent, but the cost of being a homeowner is still much less than that of being a renter, according to ""Trulia's"":http://www.trulia.com/ Winter 2013 Rent vs. Buy report.[IMAGE]
After factoring all cost components including transaction costs, taxes, and opportunity costs, Trulia found buying a home is 44 percent cheaper than renting, down slightly from 46 percent a year ago.
""Although buying a home is still cheaper than renting, the gap is closing,"" said Jed Kolko, Trulia's chief economist. ""In 2013, home prices should rise faster than rents, and mortgage rates are likely to rise in the next year as the economy improves. By next year, buying could be more expensive than renting in some housing markets, even for people with the best credit.""
In the last year, asking home prices showed a 7 percent gain compared to a 3.2 percent increase in rents during the same time period, according to data from the real estate site.[COLUMN_BREAK]
Trulia explained low mortgage rates have kept the cost of owning down; for the analysis, a 3.5 percent mortgage rate was assumed.
The San Francisco-based company also revealed that out of the 100 largest metros analyzed, buying was more affordable than renting in all metros.
In some metros, the cost of buying was much less than the national average. In Detroit, the cost of buying was 70 percent cheaper. For the next four metros in top five, the cost of owning was 63 percent less than renting. Those metros were Dayton and Cleveland in Ohio; Warren, Michigan; and Gary, Indiana.
Although owning was found to be less expensive in all metros, owners in San Francisco averaged the smallest savings at 19 percent, a steep decrease from the 35 percent savings seen in 2012.
If one were to receive a mortgage rate of 4.5 percent, Trulia noted the cost of buying would be just 9 percent cheaper in San Francisco. However, a rate of 4.5 percent would still make buying more affordable than renting in all metros.
""People who didn't buy a home last year may have missed the bottom of the market, but they haven't completely missed the boat,"" Kolko added. ""Even buyers who can't get today's lowest mortgage rates will still find that buying makes more financial sense than renting in nearly all local markets--so long as they can get a mortgage in the first place.""
Other metros where owning may not be as enticing to borrowers based on savings were Honolulu, where the cost of owning is 23 percent cheaper, followed by San Jose (-24 percent), New York (-26 percent) and Albany (-30 percent).