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To rent or buy in Austin, Texas?

Austin at night
Austin at nightJorge Michel

For many of us in Austin, the question of whether to buy a home or rent one often starts with financial considerations. Not only do we look at our own checkbook, we want to see what the Austin real estate market is doing in terms of the price to purchase a home vs. the price to rent one. Sometimes, the answers may surprise us.

To get our first inkling of which is the less expensive option, we need to look at the Rent vs. Buy Index, which compares the average cost of renting a home to the average cost of buying one. Trulia.com recently introduced its Rent vs. Buy Index, and it provides a general idea of the relative affordability of renting or buying in given cities. However it is rather limited and, in my opinion, not the best information upon which to base your decision.

First, you need to look at the Rent vs. Buy Index in the area in which you want to live - not just Austin as a whole. Is it different in Belterra than in Circle C Ranch? Is it more affordable to buy or rent in 78746? What about 78737? A savvy agent can use Trulia's methodology to dig deeper into the specifics of your area.

Second, Trulia only calculates the price-to-rent ratio using the average list price compared with the average rent (list price) of two-bedroom apartments, condos and townhomes listed on Trulia.com. Note that Trulia does NOT include the prices for single-family homes, nor anything with more than two bedrooms.

Third, Trulia makes their calculations using only list price data from units listed on Trulia.com. I feel it would be more accurate to utilize actual sold price data from all appropriate units listed on the Multiple Listing Service, which is the most comprehensive database for homes for sale/lease and homes sold/leased in Austin.

Check back later this week, and we will see whether it is better to buy or rent a home in Belterra. If you would like me to do an analysis of your neighborhood, please feel free to email me.

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