Buying is Cheaper Than Renting in 72% of American Cities

Individuals who have been debating between buying and renting their home should consider the former, as new data has shown within 72 percent of U.S., buying is the more affordable option. According to the results of Trulia's most recent Rent vs. Buy Index, buying a two-bedroom home is more affordable in 72 percent of America’s 50 most populated cities.

The results are based on total purchase price featuring the mortgage principal, interest, taxes and mortgage insurance. Additionally, the calculations took the tax breaks associated with home ownership into account. It also includes an offset for the tax advantages of homeownership, including mortgage interest, property tax and closing cost deductions. Despite all the additional expenses typically associated with the American Dream of homeownership, Trulia's research has indicated that the option makes this most financial sense.

Trulia used a standard rent ratio formula to calculate the information where "Calculating a rent ratio is as simple as taking the purchase price of a home and then dividing that number by the annual cost of renting a similar one," (Mortgage Marvel). Their research focused on median sales listing prices compared with the median rent on two-bedroom apartments, condominiums and town-homes included in their own sales database.

Factors Influencing Buyer's Market

Courtesy of the mortgage meltdown, the American housing landscape has been altered. Individuals who were committed to renting are entering the housing market to take advantage of the historic property deals across the nation while former homeowners have evolved to become renters. Since millions of homes were lost to foreclosure in 2010 alone, renting has become the new norm out of necessity. As more individuals are selecting that option, the balance of supply and demand is forcing prices to increase in the rental market.

While that is occurring, the sales market has become saturated with real estate owned (REO) and homes being sold by private sellers. Many of the homes have been substantially discounted from 20 to 30 percent below market value to entice buyers. Low price tags backed with the potential of scoring ridiculously low mortgage rates has helped to smooth price discrepancies between renting and buying, and for financially prepared consumers the time has never been better to buy a home.

Top Cities For Home Buying

Based on the rent ratio calculation results, Trulia placed cities into three basic categories. Cities with cores between were cited as areas where buying was a better value than renting. Areas with scores between 16-20 indicated buying might be more cost effective under the right circumstances. Scores over 21 indicated renting was the best choice for money conscious residents.

According to their calculations the top 10 cities for buying a home versus renting a property include:

Cities Where Renting May Be Smarter

According to Trulia's calculations, there are only four American cities, where renting makes more financial sense (New York, New York, Seattle, Washington, Kansas City, Missouri and San Francisco, California). Because of the borderline rent ratio results (18-20) of the rest of the cities on the list, individuals have to weigh additional factors and personal choices when deciding between renting versus buying:

While their calculations may make renting appear more favorable in cities including (but not limited to) Los Angeles, California, Portland,

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