DETROIT, MI – Here’s some “news” that may not be too surprising to anyone who has been following our residential real estate reports: It is 65 percent cheaper to buy a house in Detroit than it is to rent an apartment, according to Trulia.
That rate put the Motor City at the no. 1 spot on the real estate tracking and listing website’s “Rent vs. Buy: Which is Cheaper for You?” report this week.
Detroit was one of three Michigan areas to crack the Trulia’s top ten. The Warren-Troy-Farmington Hills region was at no. 6 and Grand Rapids came in at no. 8. The full top ten is below.
Overall, it is actually still cheaper to buy a home than to rent one in the 100 largest metropolitan markets Trulia tracks. Rising mortgage rates have begun to narrow the gap though, with average 30-year fixed rate for a home note at about 4.8 percent. A year ago it was just 3.75 percent, according to the Mortgage Bankers Association.
Nationally, it is currently 35 percent cheaper on average to buy a home than to rent an apartment. A year ago, that figure was at 45 percent.
Here is the methodology Trulia used to reach these conclusions:
“To compare the costs of owning and renting, we assume people get a 4.8% mortgage rate on a 30-year fixed-rate loan with 20% down; itemize their federal tax deductions and are in the 25% tax bracket; and will stay in their home for seven years. Under these assumptions, buying is 35% cheaper than renting nationwide, taking into account all of the costs and proceeds from buying or renting over the entire seven-year period. We also look at alternative scenarios by changing the mortgage rate, the income tax bracket for tax deductions, and the number of years that one stays in the home. The full methodology is available here.”
And below is the top ten markets for owning instead of renting, with their respective ratios.
1 Detroit, MI – 65%
2 Gary, Ind. – 58%
3 Memphis – 55%
4 Cleveland – 54%
5 Kansas City, Mo. – 53%
6 Warren-Troy-Farmington Hills – 53%
7 Dayton, Ohio – 53%
8 Grand Rapids, – 52%
9 West Palm Beach, Fla. – 52%
10 Akron, Ohio – 51%
