FORTUNE -- Home prices have been rising steadily for more than year, with the most recent Case-Shiller index reading showing the biggest year-over-year increase in nearly a decade. But that doesn't mean that it is a bad time to buy.
According to a just-published analysis from Trulia Chief Economist Jed Kolko, homeownership is 38% cheaper than renting nationally and in all of the 100 largest metro areas. His assumptions are fairly conservative:
Homes tend to appreciate at roughly 2% per year and the average homeowner stays in his home for roughly seven years. Of course, personal experiences can deviate markedly from the average, and Kolko looks at various home-price scenarios to see how that would change the rent or buy decision. If home prices don't appreciate at all over the next seven years, that would raise the average cost of homeownership from $1,180 per month to $1,470 to per month, but owning would still be cheaper than renting in most metropolitan areas.
Of course, if home prices fall over the next seven years, it would be cheaper to rent than buy in many cities. Kolko looked at 100 of the largest metro areas and studied what would happen if each of these cities experienced the worst seven-year home price appreciation periods in their history. The result? Even in the worst-case scenario, buying remains cheaper than renting in 37 cities, including Gary, Indiana; Detroit; Pittsburgh; and Kansas City.
But other metros pose riskier propositions. Here's Kolko:
The worst‐case scenario for Los Angeles is an annual price decline of 4.8%, which happened between 2006 Q1 and 2013 Q1. For a person today considering whether to buy or rent in Los Angeles, buying would be 63% more expensive than renting with annual price declines of 4.8%. That's a very different scenario than what we saw with our conservative baseline assumption, which makes buying 24% cheaper than renting.
A significant rise in interest rates in the coming months could also throw a wrench into Kolko's analysis. He calculates the "tipping point" at which renting becomes cheaper for individual metros. The metro closest to the tipping point is Honolulu, where mortgage interest rates rising to 5% could tip the scales in favor of renting. Other metro areas' tipping points:
If you're thinking about buying in any of these places, it may make sense to act now, lest rising interest rates make it uneconomical going forward.
Of course, buying remains cheaper than renting because many Americans are unable to qualify for mortgages or afford a down payment. And if you're in one of these camps, it makes little difference what metro you're looking to live in, as you'll be renting whether you like it or not.
The banner year for stocks signaled a boom in million-dollar home sales, but what happens if the party ends?
By Jeffrey McKinney
FORTUNE -- With stocks a whisker from posting a record this year, some investors are latching onto homes that fetch $1 million or more.
Surging stock prices and increased consumer confidence are among the factors propelling sales in the upper-end housing market, says Walter Molony, a spokesman for the National Association of Realtors.
Sales of MOREDec 16, 2013 5:00 AM ET
As long as interest rates rise on positive economic news, as opposed to bad news, the economy will continue creating jobs at a decent pace.
FORTUNE -- The U.S. economy created 195,000 jobs in June, more than most expected. The number of jobs created in April in May were revised upward, and the unemployment rate stayed at 7.6%.
The question now is will the economy continue creating jobs at a decent clip, particularly MORENin-Hai Tseng, Writer - Jul 5, 2013 8:44 AM ET
Borrowing is still relatively cheap, so more potential homeowners may dive into the market.
FORTUNE – Mortgage interest rates have been rising on signs that the U.S. economy is improving. Last week, the 30-year fixed rate reached the highest level in more than six months, climbing to an average of 3.63%, compared with 3.52% the previous week and 3.92% a year earlier. The current rate is the highest it's been since MORENin-Hai Tseng, Writer - Mar 18, 2013 10:57 AM ET
The Federal Reserve's efforts to help the mortgage market may have reached their limit.
FORTUNE -- If you are looking to refinance your mortgage, this is close to the best deal you're going to get. That's the message from two economists at the New York Federal Reserve.
That contradicts what some have been saying for a while. In fact, observers have been flummoxed about a split between home loans rates and mortgage MOREStephen Gandel, senior editor - Jan 3, 2013 1:46 PM ET
Locking in a historically low fixed rate might feel safer. But borrowers can save big on ARMs right now.
By Janice Revell, contributor
FORTUNE -- During the housing meltdown, adjustable-rate mortgages were vilified as a hallmark of irresponsible borrowing. Recently, though, they've been making a comeback, especially among affluent borrowers. This summer, for instance, Facebook (FB) CEO Mark Zuckerberg reportedly financed his home using an ARM with a rate of just MOREAug 30, 2012 5:00 AM ET
Historically low mortgage rates didn't encourage new home sales, but rising rates could finally push home-buying fence-sitters into the market.
Rates this week surged to a six-month high after President Barack Obama and congressional Republicans agreed to extend tax cuts for two years, including cuts for the wealthy. Though the deal is still being debated in Washington, financial markets interpreted the development as likely to accelerate the economic recovery MORENin-Hai Tseng, Writer - Dec 10, 2010 11:13 AM ET
Deficit hawks think the moon is made of green cheese.
Fed research insists the Fed isn't out of bullets.
Stock funds suffer yet another round of outflows.
Mortgage rates at record low for second week.
Goldman now likes the euro. Not everyone is impressed.Colin Barr - Jul 15, 2010 11:33 AM ET
|Chrysler Group orders donated Vipers destroyed|
|Albertsons to merge with Safeway|
|Everything must go: There's a flood of store closings|
|Boeing to end pension plans for non-union employees|
|Bitcoin matters. Ignore the media circus.|