Renter Nation? Methinks Not.

Falling prices and record-low mortgage rates sure makes buying a home pretty tempting, but is it actually cheaper than renting? To find out, we did an apples-to-apples comparison between the cost of renting versus buying a two-bedroom apartment, condo or townhouse. The verdict? Hands down, buying is a “winning” choice in nearly 80% of all major U.S. cities.

Foreclosure Hotspots = Real Estate Clearance Sale
Extreme couponing won’t work on real estate, but why would you even bother when buying a home today is dirt cheap, especially in cities where bank-owned properties and short-sales have flooded the housing market.

When we did our rent vs. buy analysis on the 50 largest American cities, we found that buying a home was cheapest (compared to renting) in Sin City aka the foreclosure capital of America. Not surprisingly, Phoenix, Fresno and Miami – which have also been plagued with foreclosures – followed suit.

Where Renting Reigns Supreme
As many of my friends in New York will (begrudgingly) agree, homeownership is nothing more than a pipe dream in the Big Apple and we concur. Based on our rent vs. buy analysis, living in Manhattan isn’t cheap whether you’re a renter or a homeowner. It’s just relatively cheaper to rent.

What was surprising was seeing Fort Worth and Kansas City rank so high on the better to rent than buy scale. Who would have thought? But more importantly, what’s going on here?!?

Side Note: The price:rent ratio is basically a simple division equation between the median home listing price and the median rent for 12 months. If the ratio is less than 15, it means it’s cheaper to buy. If it’s higher than 21, then it’s better to rent. If it’s in between 16 and 20, then it’s a grey area where it’s technically more affordable to rent but might make more financial sense to buy depending on the situation. To see the full Rent vs. Buy Index methodology and an interpretation key, click here.