Minneapolis has the second lowest rental vacancy rate in the nation just behind New York City.
If you’ve been thinking about buying a home in the Twin Cities, understand that in just about every city in the United States, it is now less expensive to buy a home than to rent one.
A new study by real estate website Trulia found that in 98 out of 100 U.S. cities it examined, buying a home was more affordable for most consumers than renting a similar property in an equivalent neighborhood. Only in Honolulu and San Francisco was renting more economical.
For many renting is a challenge because now the bar is set higher. Landlords who might have not bothered running a credit report before are now doing so because there are few rental vacancies available these days and they want the best tenants they can find.
From an article published last week by Kara Johnson from MortgageLoan.com:
“People will pay more for a home if they expect prices to rise and give them a better return on their investment,” said Jed Kolko, Trulia’s chief economist. “Metros where homeownership is expensive tend to have stronger long-term economic growth and little room to build new homes, like Boston and the San Francisco Bay area, where people expect home prices to increase over time. Buying is much cheaper than renting in slow-growing places with high vacancy rates and land to spare, like Detroit and Cleveland, where prices are unlikely to improve much in the future.”Selected examples of price-to-annual rent ratios in cities around the country include: Atlanta, 6.7; Houston, 7.3; Chicago, 7.9; Minneapolis-St. Paul, 8.3: Dallas, 8.5: Phoenix, 8.8; Denver, 9.6; Miami, 10.1; Seattle, 10.8; Washington, 11.2; Raleigh, 11.3; Boston, 12.0; and New York City, 14.5.The rations for Honolulu and San Francisco were 17.0 and 15.5, respectively; however, even at that level, the Trulia index only says renting will be more affordable for some people and buying will be a better choice for others, depending on tax deductions and other personal factors. The index does not unilaterally rate renting as the more affordable choice until the ratio reaches 20 or more.
So what does this mean for you?
With interest rates at all time lows, rental property in Minneapolis at lowest vacancies in ten years and rents increasing, it might mean that it’s time to sit down with your realtor to talk about buying that new home.
