MINNEAPOLIS (WCCO) — Conventional wisdom has always told us it’s cheaper to rent than to buy. But the market just may turn that thought upside down.
The real estate website Trulia tracks rent across the country, and today revealed that in many U.S. cities, renting is no longer the cheaper option.
Joe Grunnet, owner of the Downtown Resource Group in Minneapolis, says in his eyes, buying is becoming the more affordable trend here in the Twin Cities too. His business serves both renters and buyers in the urban condo and loft market, and he sees more of his clients –- an estimated 60 percent — moving into a new phase in this economy. Several years ago, he was leasing more homes.
“It’s a phenomenal time to buy, I always say if you have a solid job and live here 2-3 years you should truly look at buying now,” said Grunnet.
In Minneapolis’ North Loop, Grunnet’s client Glen Dall just may be changing his view.
“My wife and I are entering empty nester stage in life looking to move from suburbs to an urban condo,” he said.
But Dall is currently renting, and worried about rent rising with little apartment vacancy downtown.
“When we run the numbers, I don’t think the advantage is there,” said Dall. “Part of it is psychological. If we will be here for a while, and have our own thing and that sense of ownership.”
The Minneapolis based real estate consulting firm Marquette Advisors tracks the rent prices in the Twin Cities area. In December of 2011, the average rent in the Twin Cities was $927 a month, up nearly 20 dollars from last year at the same time, at $908 a month.
The rental vacancy rate in the Twin Cities during December of 2012 was 2.9 percent, down from 3.9 percent in December of 2011.
To compare to home payments, the Minneapolis Area Association of Realtors says the median home price for March of 2012 is $149,000. Loan officers tell WCCO in a mortgage calculator, the home costing $149,000 would have a mortgage payment could hover near $1,050 a month, with wiggle room for variables like taxes and insurance.
“It’s all timing though,” said Grunnet. “It’s got to make great sense for you as a consumer.”
Mary C. Bujold, President of Maxfield Research, a real estate research and consulting firm in Minneapolis says she wouldn’t be surprised if buying does become the more affordable option. She says her research shows the market is bottoming out in some areas in the country, with the inventory of distressed properties going down, and with historically low interest rates.
Figures from the Minneapolis Area Association of Realtors show pending sales on homes is up roughly 30 percent, compared to this time last year.
The decision is close call for Dall, who says he’ll most likely sign long term over a lease.
“With the market given what it is and interest rates where they are, we will be here for a while, and it might make sense to buy,” said Dall.