The last time we met, I went over Trulia's Rent vs. Buy Index and discussed where I felt it fell short and what improvements might be made. Now, please allow me to introduce The Agents For Change Price vs. Rent Ratio. We will look at very local real estate markets in and around Austin, and we will use ACTUAL sales price and rent price data - not just the list price for each*.
For starters, let's take a look at Belterra. Located a convenient 15 minutes from the 'Y' in Oak Hill, Belterra is a gleaming gem nestled in between Dripping Springs and Austin. The amenities are wonderful and include a rec center, pool complex, parks, ponds, greenbelts, trails and even an elementary school (Rooster) that is easily accessible by foot, bike or car.
Doing our best to compare apples to apples, let's take a look at three- and four-bedroom homes that have sold or been rented in the past 6 months (between September 2, 2010 and March 2, 2011) in Belterra.
There were 11 houses rented in Belterra for an average monthly rent of $1,953. These 11 houses were on the market for an average of 54 days.
There were 34 houses sold in Belterra for an average sales price of $314,760. These 34 houses were on the market for an average of 86 days.
This puts the price-to-rent ratio for Belterra over the past six months at 13.43, meaning that it is less expensive to own a home than it is to rent one in Belterra. Of course, every house and every situation is different for each person. As of today (March 2, 2011) there are 28 homes for sale and only three homes for rent available in Belterra, meaning that the supply of homes for sale far outpaces the supply of homes for rent. To see for yourself what homes are currently for sale in Belterra or anywhere in Austin - and what homes have sold in the past three months (including their sales price!) - click here for an Agents For Change Market Snapshot. If you are thinking of living there - buying OR leasing - we would be happy to help you find the best home for you and your family's situation.
*Methodology for The Agents For Change Price vs. Rent Ratio
Agents For Change calculates their price-to-rent ratio using the average sales price for homes sold and the average monthly rent for homes leased over the previous 6 months.
Sample price-to-rent calculation:
Average sales price: $314,760
Average rent: $1,953
Price-to-rent ratio: $314,760 / ($1,953 x 12) = 13.43
• Price-to-Rent Ratio of 1-15: Owning a home is less expensive than renting a home in this area.
• Price-to-Rent Ratio of 16-20: Owning a home in this area is more expensive than renting, but it might still make financial sense to buy depending on the situation.
• Price-to-Rent Ratio of 21+: Renting in this area is much less expensive than owning a home.