According to a recent article in Fortune Magazine, a report recently released by Deutsche Bank suggests the property tide is turning for some parts of the US and it is now cheaper to purchase a property than to rent in certain locations. The magazine features Deutsche Bank’s ten top cities in the US for home buyers and three out of the 10 are located in Florida, perhaps signalling that it’s a good time for Cayman residents to invest in that holiday home in the States?
Rent or Buy? A report written by a team of Deutsche Bank property analysts has revealed that the cost of renting property in the US is now on an equal footing in cities across America, with some cities even showing lower mortgage than rental costs. According to the report, the national rent-buy ratio (which shows rent as a percentage of after-tax mortgage payments) rose to 100.2 per cent during the last quarter of 2010, the highest level recorded by DB records (which date back to 1991). So where exactly are the best places to buy rather than rent in the US?
Rent as a percentage of after tax mortgage payment: 151.2 per cent
2006-2010 house price change: -33.2 per cent
Rent in Atlanta now costs about 50 per cent more than a mortgage on the same property, mainly due to the severity of the fall of its house prices, fuelled in part by the fact that Atlanta led the country in home construction pre the 2008/9 market collapse. According to Standard & Poor’s Case-Shiller Index, the cost of single-family homes dropped a further 7 per cent in January, compared with the same month in 2010. Local real estate experts say they see some improvement in sales, when it comes to volume.
Rent as a percentage of after tax mortgage payment: 137.2 per cent
2006-2010 house price change: -51.3 per cent
In February homes in Orlando hit a new low and with a median price now under $95,000, homes haven’t been that cheap since 1997.
Some realtors say Orlando could see prices increase in four years, others say in two years. But all agree that the market is starting to stabilise, slowly but surely. According to a Florida Realtors report, Orlando saw a larger price decline during the past 12 months than any of Florida’s other metro areas.
Rochester, New York
Rent as percentage of after tax mortgage payment: 136.0 per cent
2006-2010 house price change: 3.6 per cent
According to Clear Captial’s real estate data index house prices fell 4 per cent nationally in the US last year, but rose 5 per cent in the Rochester, NY region.
Rochester, along with other upstate cities like Buffalo (see below) and Syracuse, has some of the most affordable real estate in the nation.
The second-largest economy in the state, Rochester weathered the recession well because it didn’t overbuild like so many other cities did when housing took off.
Rent as a percentage of after tax mortgage payment: 132.6 per cent
2006-2010 house price change: -14.8 per cent
Real estate data provider Zillow’s statistics for the Cleveland-Elyria-Mentor metropolitan area show the house prices in January 2011 at their lowest median price since February 1999, 22 per cent less than the region’s peak in July 2006. Yet relocation.com says that home prices in some of the country’s toughest markets seem to be improving, a good sign that more buyers may be moving to Cleveland, among other cities.
The Plain-Dealer reported that home sales increased from January to February by 3.7 per cent and that low prices and interest rates could spur many people sitting on the sidelines to buy, making it even more affordable to buy.
Tampa-St. Petersburg, Florida
Rent as a percentage of after tax mortgage payment: 131.6 per cent
2006-2010 house price change: -41.4 per cent
A recent report from tampabay.com revealed that Tampa Bay area home prices fell by 1 per cent in January and hit their lowest level since they peaked in early 2006, according to a Standard & Poor’s/Case-Shiller home price index.
Nationally, the index of property values in 20 cities fell 3.1 percent from January 2010, the biggest year-over-year drop since December 2009.
But it’s not all bad news: although prices continue to fall, Bay Area sales of existing homes increased by24 per cent — in February and the latest numbers indicate prices are stabilising, with Tampa Bay’s median sales price in February up 1 percent from January and down 13 per cent compared to a year ago.
In the Tampa-St. Petersburg area, home prices plummeted so much that it’s now much more affordable to own than it is to rent. Government agencies and developers have worked together to promote downtown Tampa Bay to residential buyers, and a number of large projects are underway to attract new buyers.
Las Vegas, Nevada
Rent as a percentage of after tax mortgage payment: 125.1 per cent
2006-2010 house price change: -56.5 per cent
According to a Las Vegas Review Journal report, home sales jumped in March, largely driven by cash investors taking advantage of sliding prices, the Greater Las Vegas Association of Realtors reported. Realtors sold 3,384 single-family homes during the month, a 30.6 percent spike from February and 6.6 percent increase
Home sales were already at a strong pace to start the year and increased significantly in March, according to Realtors Association President Paul Bell.
Las Vegas, along with other Sun Belt cities like Miami and Phoenix, has been a housing disaster area, stuck with empty homes and condos since the big crash. But experts say it’s now coming back and prospective buyers can now get a new house for far less than it would cost to build one. Because the rental market is strong, renting out property could bring in a good return
Rent as percentage of after tax mortgage payment: 123.1 per cent
2006-2010 house price change: -28.1 per cent
Kiplinger.com has named Jacksonville as one of the nation’s 11 comeback cities for 2011, further to a recent report in the Jacksonville Business Journal. Kiplinger looked at cities whose unemployment rates have recently exceeded the national average but are showing strong signs of rebounding. For Jacksonville, Kiplinger forecast jobs growth of 2.8 percent, with an emphasis on hiring by financial services firms, especially large banks.
Jacksonville home prices fell 13.9 per cent in January over a year before, and high mortgage defaults, as well as foreclosures, are to blame, which in turn means good investment opportunities. In Jacksonville it now costs about 19% less to own than it does to rent.
St. Louis, Missouri
Rent as percentage of after tax mortgage payment: 123.0 per cent
2006-2010 house price change: -11.7 per cent
Home sales were recently reported down 12.7 per cent in February year-over-year and foreclosures and a weak market are making buyers nervous, which means it’s a good time for investors to purchase now and hold off selling until conditions improve.
Buffalo, New York
Rent as a percentage of after tax mortgage payment: 122.0 per cent
2006-2010 house price change: 23.8 per cent
Buffalo, as with Rochester, has a far higher portion of affordable homes than most other US markets at the moment. The city is also experiencing low foreclosures and a strong local job market.
An Inman News (website for real estate information) report that ranks the Buffalo-Niagara region as one of the 10 real estate markets to watch in 2011, with foreclosures falling 43.5 per cent in 2010, now among the lowest in America.
Rent as a percentage of after tax mortgage payment: 121.9 per cent
2006-2010 house price change: -15.5 per cent
As it sheds public housing facilities (due to the closure of the Clearborn Homes public housing project), Memphis is poised to become a buyer’s haven as there will be new property available. The Memphis Daily News says the city’s next step will be to leverage private financing for commercial and residential development in the area.