Trulia Spring 2012 Rent vs. Buy Index

Cheaper to Rent or Buy a Home?Winter 2012

What Does The Rent vs. Buy Index Tell Us? Trulia’s Rent vs. Buy Index tracks whether it is more affordable to rent or to buy a home in America’s 100 largest metropolitan areas.2

Calculating a Metro’s Price-to-Rent Ratio The Winter 2012 report is based on asking prices for rental and for-sale homes on Trulia.com between Dec 1, 2011 and Feb 29, 2012.Trulia calculates the price-to-rent ratios for 100 major U.S. metros, after adjusting for attributes of the properties and their locations, to reflect the relationship between sales and rental prices for units with similar attributes in similar neighborhoods. Sample Price-to-Rent Ratio Calculation (after adjusting for property attributes and neighborhood attributes): • Asking Sales Price: $200,000 • Asking Monthly Rent: $1500 • Price-to-rent ratio: $200,000 ÷ ($1,500 x 12) = 11.13

Interpreting a Metro’s Price-to-Rent Ratio • Price-to-Rent Ratio of 15 or less: Buying a home is a better deal than renting for people planning to live in a home for at least five years. However, if the buyer is planning to live the home for less than five years, buying could be a better deal if the index is 10 or less, depending on moving and closing costs. • Price-to-Rent Ratio of 15 to 20: Renting or buying a home could be a better deal, depending on a prospective homebuyer’s tax bracket and if they plan to itemize their tax deductions. • Price-to-Rent Ratio of 20 or more: Renting is a better deal than buying a home, except for people planning to live in a home a very long time (fifteen years or more). Note: These interpretations take into account estimates of the additional costs of homeownership or renting, such as insurance, maintenance and so on.4

National Rent vs. Buy Trends5

Buying Trumps Renting in 98 Out of the 100 Largest Metros6

Top 10 Metros Where Buying Is Most Affordable Relative To Renting Buying a home 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 # U.S. Metropolitan Area Price:Rent Ratio 1 Detroit, MI 3.7 2 Oklahoma City, OK 4.3 3 Dayton, OH 4.8 4 Warren-Troy-Farmington Hills, MI 5.4 5 Toledo, OH 6.0 6 Grand Rapids, MI 6.1 7 Cleveland, OH 6.2 8 Atlanta, GA 6.5 9 Gary, IN 6.7 10 Memphis, TN-MS-AR 6.87

Top 10 Metros Where Renting is Most Affordable Relative to Buying Metros where homeownership is expensive tend to have stronger long-term economic growth and little room to build new homes, like Boston and the SF Bay Area, where people expect home prices to increase over time. # U.S. Metropolitan Area Price:Rent Ratio 1 Honolulu, HI 17.0 2 San Francisco, CA 15.5 3 New York, NY-NJ 14.5 4 San Jose, CA 14.3 5 Orange County, CA 13.5 6 Los Angeles, CA 13.0 7 San Diego, CA 12.7 8 Colorado Springs, CO 12.0 9 Boston, MA 12.0 10 Albuquerque, NM 11.98

Local Rent vs. Buy Trends9

Where Buying Beats Renting in the New York area While priced-out Manhattanites have bid up home values in Staten Island and Brooklyn, owning a home is still cheaper than renting in Queens, the Bronx and nearby suburban counties. Borough or County Price:Rent Ratio Manhattan 20.0 Brooklyn 15.7 Staten Island 15.3 Queens 13.6 Bergen, NJ (Hackensack) 12.5 Hudson, NJ (Jersey City) 12.1 Nassau, NY (Long Island) 11.8 Bronx 10.9 Westchester, NY 9.310

Where Buying Beats Renting in the San Francisco Bay Area Homeownership is most expensive relative to renting in San Francisco, the Peninsula (San Mateo County) and in the South Bay (Santa Clara County). In the East Bay (Alameda County and Contra Costa County), where vacancies are higher and foreclosures more common, buying looks even better relative to renting than in the rest of the Bay Area. County Price:Rent Ratio San Francisco 17.2 Santa Clara (San Jose) 14.5 San Mateo 14.0 Alameda (Oakland) 12.1 Contra Costa 10.811

Where Buying Beats Renting in the Los Angeles area Buying a home generally becomes cheaper relative to renting in Southern California as you move away from the coast. The big exception: Pasadena and the San Gabriel Valley, where buying is expensive despite the long drive to the beach. Area Code Price:Rent Ratio Westside LA / Beaches / Coast (310 / 424) 15.8 Pasadena / San Gabriel Valley (626) 15.8 Orange County South (949) 14.4 Central LA (213 / 323) 13.4 Orange County North (714 / 657) 12.8 Long Beach (562) 11.9 San Fernando Valley (818 / 747) 11.7 San Bernardino (909) 10.2 Riverside (951) 9.812

Where Buying Beats Renting in the Chicago area In Chicago, homeownership is much more affordable relative to renting when compared to other major metros like New York and San Francisco. Even downtown, in the Loop and Near North Side, buying is more affordable relative to renting than in many suburbs of New York, San Francisco, and Los Angeles. Area Code Price:Rent Ratio Loop and Near North Side (312) 11.4 Chicago except downtown (773) 8.0 North/Northwest Suburbs (847 / 224) 7.7 Western Suburbs (630 / 331) 7.5 South Suburbs (708) 5.013

Why Bedroom Size Matters in Rent vs. Buy Debate In most major metros, the price-to-rent ratio is lower for smaller homes, so buying seems even more affordable relative to renting for a one-bedroom or studio home than for a home with three or more bedrooms. U.S. Metropolitan Area Price:Rent Ratio 1 Bedroom 2 Bedrooms 3+ Bedrooms (includes studio) New York, NY-NJ 13.7 14.7 15.9 Los Angeles, CA 11.6 12.5 14.1 Chicago, IL 7.1 8.0 8.5 San Francisco, CA 13.1 14.8 18.2 Washington DC-VA-MD-WV 9.9 9.9 12.6 Miami 9.5 10.1 10.414

About Trulia Trulia gives home buyers, sellers, owners and renters the inside scoop on properties, places and real estate professionals. Trulia has unique info on the areas people want to live that can’t be found anywhere else: users can learn about agents, neighborhoods, schools, crime and even ask the local community questions. Real estate professionals use Trulia to connect with millions of transaction-ready buyers and sellers each month via our hyper local advertising services, social recommendations and top-rated mobile apps. Trulia is headquartered in downtown San Francisco and is backed by Accel Partners and Sequoia Capital. Trulia and the Trulia logo are registered trademarks of Trulia, Inc. To learn more, email us at pr@trulia.com15

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Trulia Spring 2012 Rent vs. Buy Index

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