In 20 metropolitan areas across the country, it is cost effective to buy bank foreclosures instead of renting. This is the conclusion of a recent study of housing markets in various metropolitan areas. Industry experts said that in the long run, it is cheaper to buy homes than rent them.
The study was designed to rank 20 metropolitan areas nationwide where it is cheaper to buy bank foreclosures than it is to rent them. In the cities of Detroit, Michigan and Pittsburgh, Pennsylvania, renters can actually reduce their monthly costs by buying homes instead of renting.
Other cities on the list where buying is slightly expensive than renting included Memphis, Tennessee; Rochester, New York; Cleveland, Ohio; Tampa, Florida; Dallas, Texas; Columbia, South Carolina; Providence, Rhode Island; and Las Vegas, Nevada.
Researchers who conducted the study calculated the ownership costs by assuming a fixed-rate 30-year mortgage for 100 percent of the buying price and no down payment. This method is designed to develop a fair and average matchup between renting and owning.
Researchers said that if they factored in a 20 percent down payment, the result would show that owning a home is a cheaper alternative for 10 metropolitan areas.
Industry experts said that results of the study only reinforced what they have been telling potential buyers for a long time now - that the market is ripe for the picking.
They said that the collapse of the housing market has brought the equation of owning versus renting to a level similar to that before the housing bubble pushed home prices way above the costs of renting. But they noted that the rentals are also dropping now, albeit at a slower pace.
Additionally, experts said that the foreclosure crisis pulled down home prices and values from Riverside, California to Tampa. However, for several months now, housing markets are seeing some increase activity in home buying driven by federal incentive programs such as the tax credit of $8,000 provided to first-time home buyers and the historic low interest rates.
Industry experts said that to buy bank foreclosures now is the smartest investment decision any individual or family could ever make.
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