Trulia: Owning Costs 44% Less than Renting

Home price gains may be outpacing increases in rent, but the cost of being a homeowner is still much less than that of a renter, according to Trulia’s Winter 2013 Rent vs. Buy report.

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.

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. The buy-rent gap was the largest in Detroit, where buying costs 70 percent less than renting. For the next four metros in top five, the cost of owning was 63 percent less than renting; the four 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 analyzed.

“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).

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Real Estate Investors Have Positive Effect!

The Washington Post

By Justin Pierce

Despite some shifts in the housing market that make it more difficult to earn money investing in residential real estate, a large majority of people in that field plan to buy as many or more properties in the next 12 months to rent out or sell for profit. That’s one of the findings of a study released last month that attempted to measure the impact people involved in income or speculative real estate are having on the housing market . The survey — sponsored by BiggerPockets.com, the nation’s leading social Web site for real estate investors, and Memphis Invest, one of the largest providers of single-family rentals — shows that 65 percent of investors plan to buy a lot more homes during the next 12 months. Still, from my experience in the Washington area, business conditions are changing with rising home prices, stiffening competition and shrinking margins. Anyone seeking to get into real estate investing should proceed with caution and not expect to earn the same money that has been made in the past few years. The report points out that investors played a fairly substantial role in the housing recovery. The housing crisis pushed nearly 4 million foreclosures onto the open market, devastating home values. This and the coinciding financial crisis squashed homebuyers’ confidence and their ability to buy. At that time, real estate investors began buying up the foreclosures when few other people could enter the market. They bought up so many properties that they established single-family rentals as a $100 billion business. In fact, the report says that single-family rentals now outnumber apartment units. They are also renovating the homes they buy and spending an average of $7,500 per home. That totals more than $9.2 billion every year in construction-related spending, according to the report. This is critical business for an industry that was hit hard by the recession

Market Trends in Niceville Florida

Listing price – Niceville

Average Listing Price  $316,792  -1.1%
Median Sales Price  $241,000  +12.1%
Average Price/sqft  $124  +10.7%
Number of Sales  109  -32.7%

Market Report on Miramar Beach Florida

Miramar Beach Summary

The median sales price for homes in Miramar Beach FL for Jul 12 to Sep 12 was $250,000. This represents a decline of 0.8%, or $2,000, compared to the prior quarter and an increase of 8.7% compared to the prior year. Sales prices have depreciated 38.2% over the last 5 years in Miramar Beach. The average listing price for Miramar Beach homes for sale on Trulia was $588,757 for the week ending Oct 03, which represents a decline of 1.7%, or $10,065, compared to the prior week and a decline of 2.9%, or $17,327, compared to the week ending Sep 12. Average price per square foot for Miramar Beach FL was $168, a decrease of 6.1% compared to the same period last year.

 Miramar Beach average property price

Underwater Mortgages Rise

The percentage of homeowners with mortgages who owe more than their homes are worth continued to rise during the first quarter, but only 1 in 10 of underwater homeowners are seriously delinquent on their loans, according to estimates released today by real estate search portal Zillow.

Zillow — which looks at outstanding loan amounts on individual properties, and compares them with estimated valuations for each home that are generated by computer models — estimates that 15.7 million homes were underwater during the first three months of the year.

That’s 31.4 percent of all homes with mortgages, up from 31.1 percent during the last three months of 2011 (not all homeowners have mortgages).

Although just 10.1 percent of underwater homeowners were more than 90 days behind on their mortgage payments, that represents nearly 1.6 million homes that could eventually hit the market as distressed properties.

Numbers like that can put fear into the hearts of would-be homebuyers, since distressed properties sell at discounts that can drag down home prices. Those effects are highly dependent on individual market conditions.

Zillow estimates that nationwide, about 2.4 million underwater homeowners owe more than double what their home is worth. In the Las Vegas metro area, 26.8 percent of homeowners with mortgages are that deeply underwater — nearly 90,000 homes.