Despite the market’s current rough patch, now may be the right time for first-time buyers in Chicago and Washington, D.C., to purchase a single-family home. For residents of Seattle or San Francisco, however, leasing might still be the more sensible option.
A recent comparison of first-quarter median single-family home prices in the country’s Top 50 metro areas to first-quarter median rental rates in those same cities reveals that the West Coast may see more rental than buying activity. Why? The price-to-rent ratio, calculated by dividing the annual rental cost for a unit by the price of a single-family home in the same area, far surpassed the national average of 13.9. A ratio higher than 15 signifies that renting makes better financial sense.
Not everyone has done the math, though. As a result, apartment firms haven’t seen major leasing upticks or slowdowns. “Our leasing activity has stayed pretty consistent; however, in some of our submarkets, we have seen a decline in rental rates,” says Zoe Solsby, communications manager for Sares-Regis Group, an Irvine, Calif.-based development firm.
According to Karen Kossow, vice president of sales and marketing for McLean, Va.-basedKettler Management, leasing activity varies greatly by market. “The D.C. metro area has a large ‘renter by choice’ market—those who can afford to buy but prefer to lease either as a lifestyle choice or due to the fact that they are only here for one to five years and wouldn’t necessarily see a return on the purchase of a home if they can’t hold onto it after they leave D.C.”
Kossow adds that today’s main leasing challenge is the significant amount of new product on the market due to condo reversions. Plus, customers are shopping for the best value and taking longer to make decisions.
She remains optimistic, saying, “With interest rates increasing, one would believe that people will begin to think even harder about [whether to] buy.”