by Tim McLaughlin, Sr. Vice President, Weichert Financial
According to the “Winter 2012 Rent vs. Buy Index” from Trulia, homeownership is currently more affordable than renting in all but two of the 100 largest U.S. metropolitan areas.
The latest index, which is based on asking prices for rental units and for-sale homes between Dec. 1, 2011, and Feb. 29, 2012, shows that homeownership is often a relatively affordable option even in expensive real estate markets, such as New York, Los Angeles and Boston. Only in Honolulu and San Francisco is renting currently a better deal than buying.
The U.S. housing market, a notable soft spot in the nation’s weak economy for the past four years, is showing marked signs of recovery.
Real estate markets are showing signs of life as falling prices spur buyer demand, lifting home sales and new construction from the depressed levels of the past three years. The spring selling season, traditionally the busiest period of the year, appears to be off to its best start in five years. Sales of existing homes in January and February were at their highest level since 2007, according to data out early this week. The decline in real estate prices has slowed its pace, making Americans less cautious about spending and potentially more disposed to buy a home.
For the first time since 2005, investment in residential real estate, including home building and renovation, has contributed to U.S. economic output for the past 3 quarters.
Bidding wars, absent from most parts of the U.S. residential market since its peak in 2006, are erupting from Seattle to Washington, D.C. The inventory of homes hovers close to a six-year low, while an increase in jobs and record affordability are tempting more buyers. The number of contracts to buy previously owned homes jumped 14% in February from a year earlier, the National Association of Realtors reported earlier this week.
The U.S. metropolitan areas with the strongest economies appear ready to absorb the additional inventory, said Mark Zandi, chief economist for Moody’s Analytics Inc.