WSJ - Obama tries to force mortgage deal
The Obama administration is trying to push through a settlement over mortgage-servicing breakdowns that could force America's largest banks to pay for reductions in loan principal worth billions of dollars. Terms of the administration's proposal include a commitment from mortgage servicers to reduce the loan balances of troubled borrowers who owe more than their homes are worth, people familiar with the matter said. The cost of those writedowns won't be borne by investors who purchased mortgage-backed securities, these people said. If a unified settlement can be reached, some state attorneys general and federal agencies are pushing for banks to pay more than $20 billion in civil fines or to fund a comparable amount of loan modifications for distressed borrowers, these people said. But forging a comprehensive settlement may be difficult. A deal would have to win approval from federal regulators and state attorneys general, as well as some of the nation's largest mortgage ser
vicers, including Bank of America Corp., Wells Fargo & Co, and J.P. Morgan Chase & Co. Those banks declined to comment.
So far, most loan modifications have focused on shrinking monthly payments by lowering interest rates and extending loan terms. Banks, as well as mortgage giants Fannie Mae and Freddie Mac, have been shy to embrace principal reductions, in part due to concerns that many borrowers who can afford their loans will stop paying in the hope of being rewarded with a smaller loan. Several federal agencies have been scrutinizing the nation's largest banks over breakdowns in foreclosure procedures that erupted last fall. Last week, the Office of the Comptroller of the Currency said only a small number of borrowers had been improperly foreclosed upon. But the regulator raised concerns over inadequate staffing and weak controls over certain foreclosure processes.
A settlement must satisfy an unwieldy mix of authorities, including state attorneys general and regulators such as the newly formed Bureau of Consumer Financial Protection, who support heftier fines. They must also appease banking regulators, such as the OCC, that are concerned penalties could be too stiff. "Nothing has been finalized among the states, and it's our understanding that the federal agencies we are in discussions with have not finalized their positions," said a spokesman for Iowa Attorney General Tom Miller, who is spearheading a 50-state investigation of mortgage-servicing practices.
Friday, February 25, 2011
Existing homes sales up
Existing homes increased 2.7 percent to a seasonally adjusted annual rate of 5.36 million in January from a downwardly revised 5.22 million in December, and are 5.3 percent above the 5.09 million level in January 2010. This is the first time in seven months that sales activity was higher than a year earlier. A parallel NAR practitioner survey2 shows first-time buyers purchased 29 percent of homes in January, down from 33 percent in December and 40 percent in January 2010 when an extended tax credit was in place. Investors accounted for 23 percent of purchases in January, up from 20 percent in December and 17 percent in January 2010; the balance of sales were to repeat buyers. All-cash sales rose to 32 percent in January from 29 percent in December and 26 percent in January 2010. All-cash purchases are at the highest level since NAR started measuring these purchases monthly in October 2008, when they accounted for 15 percent of the market. The average of all-cash deals was
20 percent in 2009, rising to 28 percent last year.
The national median existing-home price3 for all housing types was $158,800 in January, down 3.7 percent from January 2010. Distressed homes edged up to a 37 percent market share in January from 36 percent in December; it was 38 percent in January 2010. Total housing inventory at the end of January fell 5.1 percent to 3.38 million existing homes available for sale, which represents a 7.6-month supply4 at the current sales pace, down from an 8.2-month supply in December. The inventory supply is at the lowest level since December 2009 when there was a 7.3-month supply. Single-family home sales rose 2.4 percent to a seasonally adjusted annual rate of 4.69 million in January from 4.58 million in December, and are 4.9 percent higher than the 4.47 million level in January 2010. The median existing single-family home price was $159,400 in January, down 2.7 percent from a year ago.
Existing condominium and co-op sales increased 4.7 percent to a seasonally adjusted annual rate of 670,000 in January from 640,000 in December, and are 7.9 percent above the 621,000-unit pace one year ago. The median existing condo price5 was $154,900 in January, which is 10.2 percent below January 2010. Regionally, existing-home sales in the Northeast fell 4.6 percent to an annual pace of 830,000 in January from a spike in December and are 1.2 percent below January 2010.
The median price in the Northeast was $236,500, which is 4.0 percent below a year ago. Existing-home sales in the Midwest rose 1.8 percent in January to a level of 1.14 million and are 3.6 percent above a year ago. The median price in the Midwest was $126,300, which is 3.2 percent below January 2010. In the South, existing-home sales increased 3.6 percent to an annual pace of 2.02 million in January and are 8.0 percent higher than January 2010. The median price in the South was $136,600, down 2.1 percent from a year ago. Existing-home sales in the West rose 7.9 percent to an annual level of 1.37 million in January and are 7.0 percent above January 2010. The median price in the West was $193,200, down 5.7 percent from a year ago.
20 percent in 2009, rising to 28 percent last year.
The national median existing-home price3 for all housing types was $158,800 in January, down 3.7 percent from January 2010. Distressed homes edged up to a 37 percent market share in January from 36 percent in December; it was 38 percent in January 2010. Total housing inventory at the end of January fell 5.1 percent to 3.38 million existing homes available for sale, which represents a 7.6-month supply4 at the current sales pace, down from an 8.2-month supply in December. The inventory supply is at the lowest level since December 2009 when there was a 7.3-month supply. Single-family home sales rose 2.4 percent to a seasonally adjusted annual rate of 4.69 million in January from 4.58 million in December, and are 4.9 percent higher than the 4.47 million level in January 2010. The median existing single-family home price was $159,400 in January, down 2.7 percent from a year ago.
Existing condominium and co-op sales increased 4.7 percent to a seasonally adjusted annual rate of 670,000 in January from 640,000 in December, and are 7.9 percent above the 621,000-unit pace one year ago. The median existing condo price5 was $154,900 in January, which is 10.2 percent below January 2010. Regionally, existing-home sales in the Northeast fell 4.6 percent to an annual pace of 830,000 in January from a spike in December and are 1.2 percent below January 2010.
The median price in the Northeast was $236,500, which is 4.0 percent below a year ago. Existing-home sales in the Midwest rose 1.8 percent in January to a level of 1.14 million and are 3.6 percent above a year ago. The median price in the Midwest was $126,300, which is 3.2 percent below January 2010. In the South, existing-home sales increased 3.6 percent to an annual pace of 2.02 million in January and are 8.0 percent higher than January 2010. The median price in the South was $136,600, down 2.1 percent from a year ago. Existing-home sales in the West rose 7.9 percent to an annual level of 1.37 million in January and are 7.0 percent above January 2010. The median price in the West was $193,200, down 5.7 percent from a year ago.
Thursday, February 24, 2011
MBA - foreclosures up delinquencies down
The delinquency rate for mortgage loans on one-to-four-unit residential properties decreased to a seasonally adjusted rate of 8.22% of all loans outstanding as of the end of the fourth quarter of 2010, a decrease of 91 basis points from the third quarter of 2010, and a decrease of 125 basis points from one year ago, according to the Mortgage Bankers Association's (MBA) National Delinquency Survey. The non-seasonally adjusted delinquency rate decreased 46 basis points to 8.93% this quarter from 9.39% last quarter. The percentage of loans on which foreclosure actions were started during the fourth quarter was 1.27%, down seven basis points from last quarter and up seven basis points from one year ago. The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure.
The percentage of loans in the foreclosure process at the end of the fourth quarter was 4.63%, up 24 basis points from the third quarter of 2010 and up five basis points from one year ago. The serious delinquency rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 8.57%, a decrease of 13 basis points from last quarter, and a decrease of 110 basis points from the fourth quarter of last year. The combined percentage of loans in foreclosure or at least one payment past due was 13.56% on a non-seasonally adjusted basis, a 22 basis point decline from 13.78% last quarter.
Jay Brinkmann, MBA's chief economist said "These latest delinquency numbers represent significant, across the board decreases in mortgage delinquency rates in the US. Total delinquencies, which exclude loans in the process of foreclosure, are now at their lowest level since the end of 2008. Mortgages only one payment past due are now at the lowest level since the end of 2007, the very beginning of the recession. Perhaps most importantly, loans three payments (90 days) or more past due have fallen from an all-time high delinquency rate of 5.02% at the end of the first quarter of 2010 to 3.63% at the end of the fourth quarter of 2010, a drop of 139 basis points or almost 28% over the course of the year. Every state but two saw a drop in the 90-plus day delinquency rate and the two increases were negligible."
"While delinquency and foreclosure rates are still well above historical norms, we have clearly turned the corner. Despite continued high levels of unemployment, the economy did add over 1.2 million private sector jobs during 2010 and, after remaining stubbornly high during the first half of 2010, first time claims for unemployment insurance fell during the second half of the year. Absent a significant economic reversal, the delinquency picture should continue to improve during 2011, Brinkmann said.
Mike Fratantoni, MBA's vice president for single family research said "While the foreclosure starts rate fell during the fourth quarter, the percentage of loans in foreclosure rose to equal the all-time high. The foreclosure inventory rate captures loans from the point of the foreclosure referral to exit from the foreclosure process, either through a cure (perhaps through a modification), a short sale or deed in lieu, or through a foreclosure sale. As we predicted last quarter, the percentage of loans in the foreclosure process increased in the fourth quarter, largely due to the foreclosure paperwork issues that were being addressed in September and October. These issues caused a temporary halt in foreclosure sales, particularly in states with judicial foreclosure regimes, such as New Jersey, Florida, and Illinois.
With fewer loans exiting the foreclosure process through sales, the foreclosure inventory rate naturally increased, even as fewer foreclosure starts meant that fewer loans entered the foreclosure process in the fourth quarter." "The share of loans in foreclosure in California and Florida combined was 36.0%, a decrease from 37.3% in the third quarter, and 39.3% a year ago. Over 24% of the loans in Florida are one payment or more past due or in the process of foreclosure, the highest rate in the nation, followed by Nevada at over 22%, compared to an average of 13.6% for the nation. Only eleven states saw an increase in their foreclosure start rate with Maryland seeing the largest increase."
The percentage of loans in the foreclosure process at the end of the fourth quarter was 4.63%, up 24 basis points from the third quarter of 2010 and up five basis points from one year ago. The serious delinquency rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 8.57%, a decrease of 13 basis points from last quarter, and a decrease of 110 basis points from the fourth quarter of last year. The combined percentage of loans in foreclosure or at least one payment past due was 13.56% on a non-seasonally adjusted basis, a 22 basis point decline from 13.78% last quarter.
Jay Brinkmann, MBA's chief economist said "These latest delinquency numbers represent significant, across the board decreases in mortgage delinquency rates in the US. Total delinquencies, which exclude loans in the process of foreclosure, are now at their lowest level since the end of 2008. Mortgages only one payment past due are now at the lowest level since the end of 2007, the very beginning of the recession. Perhaps most importantly, loans three payments (90 days) or more past due have fallen from an all-time high delinquency rate of 5.02% at the end of the first quarter of 2010 to 3.63% at the end of the fourth quarter of 2010, a drop of 139 basis points or almost 28% over the course of the year. Every state but two saw a drop in the 90-plus day delinquency rate and the two increases were negligible."
"While delinquency and foreclosure rates are still well above historical norms, we have clearly turned the corner. Despite continued high levels of unemployment, the economy did add over 1.2 million private sector jobs during 2010 and, after remaining stubbornly high during the first half of 2010, first time claims for unemployment insurance fell during the second half of the year. Absent a significant economic reversal, the delinquency picture should continue to improve during 2011, Brinkmann said.
Mike Fratantoni, MBA's vice president for single family research said "While the foreclosure starts rate fell during the fourth quarter, the percentage of loans in foreclosure rose to equal the all-time high. The foreclosure inventory rate captures loans from the point of the foreclosure referral to exit from the foreclosure process, either through a cure (perhaps through a modification), a short sale or deed in lieu, or through a foreclosure sale. As we predicted last quarter, the percentage of loans in the foreclosure process increased in the fourth quarter, largely due to the foreclosure paperwork issues that were being addressed in September and October. These issues caused a temporary halt in foreclosure sales, particularly in states with judicial foreclosure regimes, such as New Jersey, Florida, and Illinois.
With fewer loans exiting the foreclosure process through sales, the foreclosure inventory rate naturally increased, even as fewer foreclosure starts meant that fewer loans entered the foreclosure process in the fourth quarter." "The share of loans in foreclosure in California and Florida combined was 36.0%, a decrease from 37.3% in the third quarter, and 39.3% a year ago. Over 24% of the loans in Florida are one payment or more past due or in the process of foreclosure, the highest rate in the nation, followed by Nevada at over 22%, compared to an average of 13.6% for the nation. Only eleven states saw an increase in their foreclosure start rate with Maryland seeing the largest increase."
Thursday, February 17, 2011
Mortgage servicing crackdown expected
U.S. banking regulators are close to finalizing new national guidelines that will impact mortgage servicing shops after an interagency investigation revealed "significant weaknesses in mortgage servicing related to foreclosure oversight and operations," said John Walsh, the Acting Comptroller of the Currency, in prepared statements to be delivered before a Senate Banking panel today. "In general, the examinations found critical deficiencies and shortcomings in foreclosure governance processes, foreclosure document preparation processes, and oversight and monitoring of third-party law firms and vendors," Walsh said.
"These deficiencies have resulted in violations of state and local foreclosure laws, regulations, or rules and have had an adverse affect on the functioning of the mortgage markets and the U.S. economy as a whole." Walsh said even though the process of outlining new guidelines for servicers is at its early stage, regulators intend to address some of the pressing issues they discovered while investigating the servicing process — namely a lack of national standards for the foreclosure process and borrower confusion over whom to contact in foreclosure cases due to uncertain protocols.
Walsh's report on the investigation of loan servicing firms comes on the heels of a major announcement from the Mortgage Electronic Registration System, or MERS. MERS, which is an electronic registry of mortgage records, informed members late Wednesday that they are now prohibited from foreclosing on residential loans using the MERS name. MERS has long been the target of foreclosure defense attorneys and consumer advocates for creating a foreclosure process that fails to create transparent oversight and protocols.
Walsh said as part of their comprehensive examination of servicing shops, regulators examined Lender Processing Services Inc. (LPS), MERSCORP, the parent company of MERS, and MERS itself. After reviewing the servicing shops and examining bank self assessments, as well as 2,800 foreclosure cases, Walsh said investigators concluded that there were "significant weaknesses in mortgage servicing related to foreclosure oversight and operations." He said regulators have yet to finalize their proposed guidelines, but that will be the next step in the process.
"These deficiencies have resulted in violations of state and local foreclosure laws, regulations, or rules and have had an adverse affect on the functioning of the mortgage markets and the U.S. economy as a whole." Walsh said even though the process of outlining new guidelines for servicers is at its early stage, regulators intend to address some of the pressing issues they discovered while investigating the servicing process — namely a lack of national standards for the foreclosure process and borrower confusion over whom to contact in foreclosure cases due to uncertain protocols.
Walsh's report on the investigation of loan servicing firms comes on the heels of a major announcement from the Mortgage Electronic Registration System, or MERS. MERS, which is an electronic registry of mortgage records, informed members late Wednesday that they are now prohibited from foreclosing on residential loans using the MERS name. MERS has long been the target of foreclosure defense attorneys and consumer advocates for creating a foreclosure process that fails to create transparent oversight and protocols.
Walsh said as part of their comprehensive examination of servicing shops, regulators examined Lender Processing Services Inc. (LPS), MERSCORP, the parent company of MERS, and MERS itself. After reviewing the servicing shops and examining bank self assessments, as well as 2,800 foreclosure cases, Walsh said investigators concluded that there were "significant weaknesses in mortgage servicing related to foreclosure oversight and operations." He said regulators have yet to finalize their proposed guidelines, but that will be the next step in the process.
Wednesday, February 16, 2011
President tries to curb mortgage interest rate deduction
The president proposed in his budget to curtail high-income earners' tax deduction for mortgage interest payments and charitable contributions. Under his proposal, taxpayers in the 33% and 35% tax brackets would only be able to deduct their contributions and mortgage interest payments at the 28% rate. It would affect those with taxable income of $250,000 and up and bring in $321 billion over 10 years, according to the White House. The Obama administration, as well as several tax and deficit commissions, have called for limiting or eliminating the deductions in the past. But the proposals have gone nowhere and the same outcome is expected this year. Still, the real estate industry and non-profit sector are not taking any chances. They are making it clear to both Congress and the White House that they strongly oppose any limits to the deductions.
The industry is concerned that capping the deduction will hurt the housing market, which continues to stumble. The tax break makes homeownership more affordable, they argue. This is the second time in recent months that the Obama administration has recommended curtailing the deduction, which costs the Treasury Department an estimated $131 billion a year. In December, a presidential debt panel recommended turning the itemized deduction in to a 12% non-refundable tax credit available to everyone. It would also cut the size of eligible mortgages in half to up to $500,000. "NAR will remain vigilant in opposing any plan that modifies or excludes the deductibility of mortgage interest," National Association of Realtors President Ron Phipps said at the time.
The industry is concerned that capping the deduction will hurt the housing market, which continues to stumble. The tax break makes homeownership more affordable, they argue. This is the second time in recent months that the Obama administration has recommended curtailing the deduction, which costs the Treasury Department an estimated $131 billion a year. In December, a presidential debt panel recommended turning the itemized deduction in to a 12% non-refundable tax credit available to everyone. It would also cut the size of eligible mortgages in half to up to $500,000. "NAR will remain vigilant in opposing any plan that modifies or excludes the deductibility of mortgage interest," National Association of Realtors President Ron Phipps said at the time.
Friday, February 11, 2011
NAR - GSE's should maintain public involvement
According to the National Association of Realtors’ recommendations for restructuring the government-sponsored enterprises (GSEs), continued government participation in the secondary mortgage market is essential to ensuring affordable and available home mortgages to qualified consumers when private lenders withdraw from the market. NAR’s recommended plan is to restructure the entities as government-chartered, non-shareholder owned authorities that protect taxpayers and ensure continued access to affordable mortgages for consumers who are willing and able to assume the responsibilities of the American Dream of home ownership. NAR believes the previous structure of Fannie Mae and Freddie Mac with private profits and taxpayer loss must never recur; however, without some level of government backing of the most basic, simple mortgages – such as the 30-year fixed rate product – interest rates and mortgage fees will be notably higher for consumers and could severely restric
t access to credit, especially during down or disruptive markets. The recent economic downturn, for example, caused private capital to flee the marketplace; government backing of residential mortgages was critical in providing capital to borrowers and without their support the financial crisis could have been far worse.
NAR encourages private market solutions and innovations such as covered bonds for less traditional mortgages. However, a full privatization across all mortgage products will inevitably put taxpayers at risk. Given the very high concentration in the banking industry, the market will be vulnerable to tacit collusion and too-big-to-fail mistakes. The restructured GSEs under NAR’s plan would guarantee or ensure a wide range of safe, reliable mortgage products such as 15- and 30-year fixed rate loans. Sound and sensible loan underwriting standards would need to be established. NAR’s plan would require the entities to be fully self-financing and subject to tight regulations on product, revenue generation and usage in a way that ensures they can accomplish their mission and protect taxpayer dollars.
t access to credit, especially during down or disruptive markets. The recent economic downturn, for example, caused private capital to flee the marketplace; government backing of residential mortgages was critical in providing capital to borrowers and without their support the financial crisis could have been far worse.
NAR encourages private market solutions and innovations such as covered bonds for less traditional mortgages. However, a full privatization across all mortgage products will inevitably put taxpayers at risk. Given the very high concentration in the banking industry, the market will be vulnerable to tacit collusion and too-big-to-fail mistakes. The restructured GSEs under NAR’s plan would guarantee or ensure a wide range of safe, reliable mortgage products such as 15- and 30-year fixed rate loans. Sound and sensible loan underwriting standards would need to be established. NAR’s plan would require the entities to be fully self-financing and subject to tight regulations on product, revenue generation and usage in a way that ensures they can accomplish their mission and protect taxpayer dollars.
US Postal Service in trouble
US Postal Service in trouble
The US Postal Service (USPS), a self-supporting government agency that receives no tax dollars, said it suffered a loss of $329 million in the first quarter of federal fiscal year 2011. That compared with a loss of $297 million a year earlier. The agency has been suffering from an ongoing decline in mail volume, which has undercut revenues, while retiree health care costs have been straining its reserves. Excluding costs related to retiree benefits and adjustments to workers' compensation liability, the Postal Service said it had net income was $226 million in the first quarter, which ended Dec. 31. The agency said it will be forced to default on some of its financial obligations this year unless Congress changes a 2006 law requiring it to pay between $5.4 and $5.8 billion into its prepaid retiree health benefits each year. The Postal Service has taken a number of steps to increase revenue, including marketing initiatives and price increases. The agency raised rates an av
erage of 3.6% in January.
It is also perusing more dramatic changes. Last year, the USPS submitted a request to the Postal Regulatory Commission, which oversees the agency, to eliminate Saturday mail service. The commission has yet to respond to the request, but a spokesman said it is in the "final phase" of making its decision. The USPS has also cut back on hours to save money. The agency expects to eliminate 40 million work hours this fiscal year as part of a plan to save $2 billion. However, the service is currently negotiating new contracts with the American Postal Workers Union and the National Rural Letter Carriers Association, which will probably object to cutting hours. On the bright side, the Postal Service said improving economic conditions suggest the "worst of the precipitous volume decline during the recession is over." But mail volume continues to be anemic, rising only 1.5% in the first quarter as economic growth remains sluggish.
The US Postal Service (USPS), a self-supporting government agency that receives no tax dollars, said it suffered a loss of $329 million in the first quarter of federal fiscal year 2011. That compared with a loss of $297 million a year earlier. The agency has been suffering from an ongoing decline in mail volume, which has undercut revenues, while retiree health care costs have been straining its reserves. Excluding costs related to retiree benefits and adjustments to workers' compensation liability, the Postal Service said it had net income was $226 million in the first quarter, which ended Dec. 31. The agency said it will be forced to default on some of its financial obligations this year unless Congress changes a 2006 law requiring it to pay between $5.4 and $5.8 billion into its prepaid retiree health benefits each year. The Postal Service has taken a number of steps to increase revenue, including marketing initiatives and price increases. The agency raised rates an av
erage of 3.6% in January.
It is also perusing more dramatic changes. Last year, the USPS submitted a request to the Postal Regulatory Commission, which oversees the agency, to eliminate Saturday mail service. The commission has yet to respond to the request, but a spokesman said it is in the "final phase" of making its decision. The USPS has also cut back on hours to save money. The agency expects to eliminate 40 million work hours this fiscal year as part of a plan to save $2 billion. However, the service is currently negotiating new contracts with the American Postal Workers Union and the National Rural Letter Carriers Association, which will probably object to cutting hours. On the bright side, the Postal Service said improving economic conditions suggest the "worst of the precipitous volume decline during the recession is over." But mail volume continues to be anemic, rising only 1.5% in the first quarter as economic growth remains sluggish.
Tuesday, February 8, 2011
Cheaper to buy than to rent in 72% of largest U.S. cities
Despite the rising number of renters across the country, it is cheaper to buy a home rather than rent one in 72 percent of the 50 largest cities in the U.S., according to an index released by real estate search and marketing site Trulia.
"Since the start of the 'Great Recession,' many former homeowners have flooded the rental market. Following the principles of supply and demand, renting has become relatively more expensive than buying in most markets," said Pete Flint, CEO and co-founder of Trulia, in a statement.
"Though necessary for achieving true economic recovery, stricter bank lending practices have also further aggravated the struggling housing market in the short term. Even highly qualified homebuyers face intense scrutiny on their income, savings, existing debt and credit history before they can get a mortgage loan."
Trulia's rent vs. buy index compares the median list price with the median rent on two-bedroom apartments, condominiums and townhomes listed on Trulia.com as of Jan. 10, 2011.
A price-to-rent ratio of 1 to 15 means that it's much cheaper to buy than to rent in a particular city. A ratio between 16 and 20 means that it's more expensive to rent than to buy, but, depending on the family's situation, buying could "make financial sense," the site said. Any ratio above 20 indicates that owning is much more costly than renting in a city.
In 36 out of 50 of the country's most populous cities, buying a two-bedroom home is less expensive than renting one. These cities include many areas that have been hit hard by foreclosures, such as Las Vegas, Phoenix and Fresno, Calif.
Article continues below
Price to Rent Ratio
In 10 cities, renting is cheaper, but buying might make more financial sense, according to Trulia. These cities include Los Angeles, Boston, and Fort Worth, Texas.
The index considers the total cost of homeownership compared to the total cost of renting. Calculations for the total cost of homeownership include mortgage principal and interest, property taxes, hazard insurance, closing costs at time of purchase, homeowners association dues, and private mortgage insurance. The homeownership cost calculation also includes tax advantages from mortgage interest, property tax and closing-cost deductions.
Calculations for total rental cost include rent and renters insurance.
The total cost of homeownership was highest, compared to the cost to rent, in New York; Seattle; Kansas City, Mo.; and San Francisco.
"Although owning a home is relatively more affordable in most cities, market conditions have caused an interesting demographic swap between traditional renters and buyers," said Tara-Nicholle Nelson, consumer educator for Trulia, in a statement. Nelson is also an Inman news columnist.
"For example, lifelong renters are seizing the opportunity to become homeowners while affordability is high. At the same time, a growing number of longtime homeowners are finding themselves tenants -- some by choice and others by necessity."
Through newly acquired startup Movity, Trulia created interactive maps comparing each city's population, projected job growth, and unemployment and foreclosure rates.
"Since the start of the 'Great Recession,' many former homeowners have flooded the rental market. Following the principles of supply and demand, renting has become relatively more expensive than buying in most markets," said Pete Flint, CEO and co-founder of Trulia, in a statement.
"Though necessary for achieving true economic recovery, stricter bank lending practices have also further aggravated the struggling housing market in the short term. Even highly qualified homebuyers face intense scrutiny on their income, savings, existing debt and credit history before they can get a mortgage loan."
Trulia's rent vs. buy index compares the median list price with the median rent on two-bedroom apartments, condominiums and townhomes listed on Trulia.com as of Jan. 10, 2011.
A price-to-rent ratio of 1 to 15 means that it's much cheaper to buy than to rent in a particular city. A ratio between 16 and 20 means that it's more expensive to rent than to buy, but, depending on the family's situation, buying could "make financial sense," the site said. Any ratio above 20 indicates that owning is much more costly than renting in a city.
In 36 out of 50 of the country's most populous cities, buying a two-bedroom home is less expensive than renting one. These cities include many areas that have been hit hard by foreclosures, such as Las Vegas, Phoenix and Fresno, Calif.
Article continues below
Price to Rent Ratio
In 10 cities, renting is cheaper, but buying might make more financial sense, according to Trulia. These cities include Los Angeles, Boston, and Fort Worth, Texas.
The index considers the total cost of homeownership compared to the total cost of renting. Calculations for the total cost of homeownership include mortgage principal and interest, property taxes, hazard insurance, closing costs at time of purchase, homeowners association dues, and private mortgage insurance. The homeownership cost calculation also includes tax advantages from mortgage interest, property tax and closing-cost deductions.
Calculations for total rental cost include rent and renters insurance.
The total cost of homeownership was highest, compared to the cost to rent, in New York; Seattle; Kansas City, Mo.; and San Francisco.
"Although owning a home is relatively more affordable in most cities, market conditions have caused an interesting demographic swap between traditional renters and buyers," said Tara-Nicholle Nelson, consumer educator for Trulia, in a statement. Nelson is also an Inman news columnist.
"For example, lifelong renters are seizing the opportunity to become homeowners while affordability is high. At the same time, a growing number of longtime homeowners are finding themselves tenants -- some by choice and others by necessity."
Through newly acquired startup Movity, Trulia created interactive maps comparing each city's population, projected job growth, and unemployment and foreclosure rates.
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