Buying a home is cheaper than renting in 72 percent of the largest U.S. cities, led by Miami and Las Vegas, as an increase in foreclosures boosts demand for apartments, said real estate data provider Trulia Inc.
The cities where purchasing is most affordable include Arlington, Texas, and Mesa and Phoenix, Arizona, according to Trulia’s latest Rent vs. Buy Index, released today. The San Francisco-based company compares the costs of leasing and buying a two-bedroom home in the 50 biggest cities each quarter.
“Many former homeowners have flooded the rental market,” Trulia Chief Executive Officer Pete Flint said in a statement. “Following the principles of supply and demand, renting has become relatively more expensive than buying in most markets.”
A record 2.87 million homes received notices of default, auction or repossession in 2010, a 2 percent gain from a year earlier, data seller RealtyTrac Inc., based in Irvine, California, said earlier this month. People forced to lease after losing their homes to foreclosure helped boost rents and send U.S. apartment vacancies to a two-year low in the fourth quarter, according to Reis Inc. data.
Renting is less expensive than buying in only four cities Trulia tracks: New York; Seattle; Kansas City, Missouri; and San Francisco. Boston, Cleveland and eight other cities have relative affordability for renting, though “buying may still be a financially sound long-term decision,” the company said.
The top 10 cities where buying is cheaper are all in Florida, Nevada, Texas, Arizona and California. Except for Texas, those states were among the five with the highest foreclosure rates in 2010, according to RealtyTrac.
The two most affordable cities for buying a home also have among the highest mortgage-default rates. In Miami, one in every 309 homes received a foreclosure filing in December, and in Las Vegas, one in every 76 did, according to RealtyTrac.
Trulia compares the median list price with the median rent on two-bedroom apartments, condominiums, townhouses, lofts and co-ops listed on its website, and takes into account ownership costs including mortgage payments, property taxes and insurance.
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