Renting Vs. Buying - The Numbers Continue To Become More Affordable

In the current marketplace many Americans have become content to rent after seeing the steep decline in home prices in recent years. However, with home rents slowly beginning to rise and home prices continuing to decrease, this year may see a shift for many to consumers to look into once again purchasing. That is to say, the affordability of buying versus renting may very well move buyers off of the fence to purchase.

While the past few years events have made home ownership less appealing to some potential homeowners, in certain areas of the country, the numbers actually paint a picture that home ownership makes sense again right now.

In Moody's latest list of rent ratios (which is the price of a typical home divided by the annual cost of renting that home) for 54 U.S. metropolitan areas, 39 fell into the 'better to rent' category, meaning that it is financially smarter to rent than to buy in these markets.

However, this may finally be about to change. Moody's chief economist Mark Zandi expects the trend to reverse this year in many major cities. This would be a positive development, as a healthy housing market typically puts renting and owning at more equal footing.

"By mid 2011 and certainly by end of 2011, buying will be superior to renting in most parts of the country," Zandi says.

Still, the comparison in costs between renting and buying will depend largely on the individual market conditions. For instance, in Arizona, where high foreclosure rates continue to exist, decreased home prices will continue keep homeownership more affordable than renting.  Meanwhile, renting will probably continue to make more financial sense in national and regional job centers such as New York, and Seattle.

And while it could become more attractive to buy than rent this year, it's anyone's guess as to how long it could take before a flurry of home sales transpire. Household finances have improved only modestly and are still quite a mess. Also, lending standards for new mortgages have tightened considerably and many economists have said a housing rebound will likely fall mercy to the unemployment rate, which is expected to improve some but still hover over 9%. It will undoubtedly be once again an interesting year in the housing market, but one positive lining is of course increased affordability.