So for the third time this year, we pitted the cost of renting against the cost of buying a two-bedroom apartment, condo or townhouse to see who would win in a fair fight. Without rubbing it in too much, let’s just say homeownership was awarded the KO victory (for those of you at home who don’t watch boxing or mixed martial arts, ‘KO’ stands for ‘knockout’ which means they won with a single punch) in 3 out of 4 major U.S. cities.
Oh Snap! Miami’s Heating Up
Just to be perfectly clear, we’re not talking about the Miami Heat and King James (that would be LeBron James for our readers who aren’t basketball fans). What we are talking about is the beginnings of an interesting shift that’s happening to the housing market in the city of Miami.
Many of the foreclosed homes held by lenders are currently frozen (let’s just say there are lot of unresolved legal issues) and international homebuyers have their eyes on prime American beach-front real estate. Everyone from the Russians and Brazilians to the Canadians are snapping up Florida condos, which has created a bit of a mini-buying boom. As of right now, buying a home is still much more affordable than renting, but if all this keeps up, things could change….dun, dun, dun.
|#||U.S. City||Price:Rent Ratio
|3||Las Vegas, NV||6||6||-7%|
Motivating Motor City
We’ve said a million times that the housing market won’t get better until there are more jobs and it’s not looking great right now. When we plotted out unemployment rates across a colored spectrum (see below), where green means plenty of people are working in this town and red means you’re lucky if you have a job. Meanwhile, all the grey dots mark past unemployment rates.
If you look at the direction that most of the colored dots are headed, unemployment seems like it’s gradually getting worse.
But how bad is bad? Well, our friends over at SimplyHired.com shared their data with us on how the job market is doing and it’s pretty telling (especially when you graph it out like we did). Overall, the number of job openings right now is either less than what it was last year, or about the same. When you compare how employment looked in January and April (the grey dots), volume of new jobs being created now has dropped. Bottom line: things are moving in the wrong direction.
Interestingly, Detroit looks somewhat better when it comes to job growth – right now there are 60% more jobs than there were this time last year. In fact, word on the street is, “Motown” has one of the fast growing tech industries in the country and that a few select companies are handing out a fat $20K check to their employees to buy homes, or $2,500 a month to rent a pad, in downtown Detroit.
But policy and revitalization initiatives aside (because it’s anyone’s guess as to whether they’ll be successful), let’s circle back to the main topic at hand – renting versus buying. Right now, Detroit’s housing market is still on life support and there are so many foreclosures that banks would rather demo them than keep them. More importantly, unemployment in Detroit is still sky high at 10.5%. For most folks, it’s a moot point, but let’s say you did have a well-paying job (where your boss is pretty much giving you a down payment on a silver platter) and the average home would only set you back by $50Gs, are you seriously going to rent? No pressure, just saying.
Side Note: In a nutshell, we calculate the price:rent ratio by dividing the median listing price by the median rent for one year. 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. Here’s the full methodology and report findings: