Among the many things to come out of the Great Recession, and the residential real estate meltdown that initially caused it, is a significant increase in the number of people questioning whether it's better for them to rent or buy a home.
It used to be if you could buy a home, you did, said Tara-Nocholle Nelson, spokeswoman for the real estate website Trulia.com. Now more people are considering renting, even if they can afford to own.
In an attempt to provide these people with information to answer this question, Trulia has come up with a rent vs. buy index for cities.
The index works like this: Trulia takes all the 2-bedroom apartments, condos and townhouses listed for sale and/or rent on its website for a particular city. It then takes the average list price of those listed for sale and divides it by the average annual rent of similar properties.
Trulia has just released its Rent vs. Buy index for Sept. 2010 for the 50 largest U.S. cities. The list ranks Raleigh (just Raleigh, not the Triangle) as the 14th most affordable city to buy a home with a list price to rent ratio of 15. Charlotte is ranked 25 and has a ratio of 17.
(The city with the lowest ratio is Arlington, Texas at 7; the city with the highest is New York City at 35.)
Raleigh's ranking is a sign of a pretty healthy market. Any ratio above 16 means it's probably too expensive to buy compared to renting.
"[Raleigh] is a market that doesn't look like it has a whole lot of bubble potential in it," she said. "It looks like people are probably deciding whether to rent or own in a place like that based on what make sense for their lives rather than its just so prohibitively expensive to buy that nobody can. But it's also not so cheap that sellers are looking like they're hurting severely right now."
Most of the city's where the ratio is the lowest and buying is most affordable are foreclosure hot spots like Miami, Phoenix and Detroit. Those cities are also seeing rental rates rise as foreclosed upon homeowners rush into rental properties and drive rates up, Nelson said.
Cities with the highest ratios are places like San Francisco and New York where prices are high and rent control laws make renting much more affordable.
A study of the Raleigh housing market shows a tail of two price ranges, Nelson said. The city has a seven to eight month supply of homes priced at below $300,000.
"That's right were everybody in the country would like to be," she said.
The number of homes for sale at price points above $300,000 is much higher.
So what does all this mean if you're debating between renting or buying in Raleigh?
Nelson said it means more people are able to make such a decision themselves instead of having the market make it for them.
"It's somewhat empowering because it does really allow you to make that decision based on what's right for your life and your finances and your family versus just being forced into a decision by default by the market," she said.