According to reports from Hotpads.com, a rental listing service that also generates market data on rental statistics, rental prices rose to a hefty 14.4% in 2012. As rental prices are expected to rise, homeownership will actually prove to be more cost effective than renting. With these inflated rental prices, more people are opting for homeownership.
According to Hotpads:
- Across 45 major cities, rental prices grew 14.4% while for-sale prices increased 4%.
- San Francisco, Chicago, and Miami had the highest rental price growth while Detroit, Baltimore, and Pittsburgh experienced noticeable rental price declines.
- On the for-sale side, Miami, Washington, DC, and Charleston lead the way in sale price growth while Savannah, Pittsburgh, and Columbus saw the biggest price setbacks.
- San Francisco, Denver, and Seattle had fastest moving rental markets, as measured by number of days a property is listed on HotPads.
Even with rental prices soaring, and home prices actually being cheaper in the long run, the easiest way to figure out if you’re ready to become a homeowner is using the rent ratio. To figure out your rent ratio, you take the house’s purchase price and then divide it by your yearly rental costs. According to the New York Times “the number 20 provides a useful rule of thumb. When you do the math, you discover that a ratio above 20 means you should at least consider renting, especially if you may move again in the next five years or so. When the ratio is well below 20, the case for buying becomes a lot stronger.”
Only you would know if you’re ready for homeownership. Debt, life changes such as marriage, divorce or death may throw a monkey wrench into your plans, so renting may be a short-term option just so you can recover from those unexpected events.
Clutchettes, have you made the jump into the housing market? If you’re renting, do you plan on buying soon?