With 3.99% mortgage rates, now might seem like a great time to buy in most of the country. Actually, according to the Trulia price-to-rent ratio, anything under a ratio of 15 means it’s better to buy. Michigan and Ohio are two states where buying makes much more sense.

However, some cities are still too expensive to justify buying unless you can afford it. Take for instance, New York City. Want a 2-bedroom, 2-bathroom condo in the city? How does $1.1 million sound? Or what about San Francisco? Though rents might be skyrocketing because property values are on the rebound, buying might only be beneficial for top income earners or the 1%.

Even in my neighborhood, a suburb of Los Angeles, homes are averaging $400K+. Using a rent to buy cost calculator, a $400,000 house might be a better option if I had 20% down, was going to stay in the home for 10-years and my rent was more than $2,300 a month. Since my rent is a little less than this and I don’t have $80,000 to put down on a house, renting makes more sense for now.

Yet, if I do move to say Sacramento or a less expensive area, buying would make more sense depending on going rental rates. Of course, I can’t justify renting on a calculator alone. There is something about owning a home and having the freedom to modify it the way I want. Owning a home also makes more sense in the long run; someday the home will be paid off free and clear (except for insurance and taxes of course!)

Buying is still in my future, but things will have to line up perfectly. (or close to it.) 😉

What’s the price-to-rent ratio in your city?


    • @ Well Heeled Blog – I’ve been searching for a less expensive area (that I like) in CA and it’s definitely challenging. I’m sure I’ll eventually find one (hopefully!)

  1. Getting that down payment together in an expensive city stops a lot of people. Renting to own may help out in those situations. I still think this is a great time to buy and rent out.

    • @Krantcents – It is a great time to buy (especially compared to a few years ago!) However, some areas are just so expensive. Hopefully I’ll find one with reasonable property values, a great urban center, and nice weather. 😉

  2. Jeff @ Sustainable Life Blog Reply

    Great article – I ran these numbers in my area, and they made sense for us to buy, mainly because rent was inflated here due to a military base in town. We had been saving the cash for a downpayment so we had the money, and then started looking – it has been a lot of work since then.

    • @Jeff – I’m glad you brought up the work. Even if you find an affordable house you like, repair and maintenance can be time consuming.

  3. Having your own is becoming difficult day by day. Though it’s quite hard to buy a house, it could be beneficial in the future. Since the rent is increasing rapidly too.

  4. Housing price is just one factor involved here… another big factor is employment. Michigan housing prices are low, but so are available jobs in many parts. In fact, employment is usually the most important factor in a housing market since people can buy houses without a job.

    • @Joe – That’s an excellent point. If there aren’t many jobs in an area, rock-bottom home prices won’t matter to anyone unemployed.

  5. JP @ My Family Finances Reply

    It’s a very important tool. Buying a home is quite the financial undertaking. It would be horrible if you bought and can’t earn a return on your investment because of the housing market. In my housing market, you’d be crazy not to buy because housing prices are low, but rents are at least average if not highter.

  6. Everyone wants to be the owner of a home for his family. I guess that it is a good idea to find out if we can afford buying one before we do anything. For the meantime, it will be wise to rent a house.

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