Rent or Buy? Trulia Deems DC on the Threshold

• August 16th 2011

by UrbanTurf Staff

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DC straddles the line between a place that people should continue renting and one that residents should dive in and buy a home, according to a third quarter report published today by real estate search website Trulia.com.

Trulia’s Rent vs. Buy Index, which launched in June 2010, calculates the price-to-rent ratio using the median list price for two-bedroom properties compared with the median rent for two-bedroom apartments, condos and townhomes listed on its site.

In the past, the index used a rule of 15, which meant that if the median list price divided by the annual median rent produced a score of 15 or less, the city was considered a good place to buy. The index was separated into three categories: The first included cities with scores ranging from 1 to 15, which were considered places where it was more expensive to rent than to buy; the second, with scores of 16-20 were places where renting or buying was more situation dependent; and the third, with scores of 21 or higher, were places where buying costs were significantly greater than renting.

The website has now changed things slightly, splitting the index into four categories:

• Cities with scores between 6 and 12 are deemed more affordable to buy
• Cities with scores between 13 and 18 are places where renting is cheaper, but it might be better to buy
• Cities with scores between 19 and 31 are places where renting is more affordable.
• Cities with scores between 32 and 38 are places where renting is much more affordable.

DC scored a 14 on the Trulia scale, putting it into the “renting is cheaper, but it might be better to buy” category. Over the last three quarters, DC’s score has been inching up, from 12 in January to 13 in April. In comparison, New York scored a 36 and Las Vegas scored a 6 in the third quarter.

Rent-versus-buy calculators like Trulia’s and the one created by The New York Times are far from perfect gauges in helping a person determine whether they should continue renting or buy a home. While the Trulia index does provide some perspective on the rent versus buy debate, an individual’s decision to buy a home requires taking a number of variables into account (property taxes, down payment, interest rates) for the total cost of ownership, a point that Trulia has acknowledged to UrbanTurf in the past.

“We created the index to determine which cities have overpriced rent and which have underpriced,” Daisy Kong of Trulia told UrbanTurf in January. “The decision to buy a home is a very personal one and the index should just be used as a guide in that process.”

To see how DC compares to other cities in the country, check out this interactive map based on the index findings.

This article originally published at http://dc.urbanturf.production.logicbrush.com/articles/blog/rent_or_buy_trulia_deems_dc_on_the_threshold/3993.