The foreclosure crisis has made buying a two-bedroom home cheaper than renting one in the nation’s largest cities, but San Francisco continues to buck that trend.
The latest report by real estate website Trulia found that San Francisco is one of only four cities in the country where residents save money by becoming tenants instead of homeowners.
“San Francisco has been in that position for quite a while,” said Ted Gulickson of the San Francisco Tenants Union. “Buying is so expensive in San Francisco that it is truly a place to rent. It seems unlikely that it would ever change.”
Trulia’s study — which only took into consideration two-bedroom apartments, condominiums and townhouses — used a price-to-rent ratio to calculate its rankings.
Cities with a ratio of 21 or higher were deemed cheaper to rent than to buy.
The study found that San Francisco, with an estimated median home price of $763,000 and an annual rent cost of about $36,000, came in with a price-to-rent ratio of 21, as did Kansas City, Mo. Not surprisingly, New York had the most-expensive real estate and a price-to-rent ratio of 31.
But with home prices plummeting throughout the country, buying has become the better deal for 72 percent of America’s 50 largest cities, the study found.
“Lifelong renters are seizing the opportunity to become homeowners while affordability is high,” Tara-Nicholle Nelson, the consumer educator for Trulia, said in a statement. “At the same time, a growing number of longtime homeowners are finding themselves tenants — some by choice and others by necessity.”
And it is still cheaper despite the fact that rents in San Francisco increased throughout the first three quarters of 2010, while remaining steady throughout the holidays, according to data from RealFacts, a real estate research firm.
“San Francisco has always had the highest rents in any market in the country,” RealFacts co-founder Sarah Bridge said. “What we’ve seen over the last years is a drop in occupancy. That doesn’t mean the bottom is going to fall out of a world-class city such as San Francisco.”
In San Francisco and the greater Bay Area, home values have fluctuated, but not nearly as much as places such as Central California.
“There are a lot of buyers now, but they’re all looking for a deal,” said John Gillespie, owner of Bay Area-based Alpine Mortgage. “They’re out there, but they’re not jumping in. One of the key components is the expectation that the house will appreciate.”