Seattle is second-worst city to buy versus rent

Construction workers align Seattle's famous Wonder Bread sign on top of the Pratt Park apartment building on July 16, 2010. | See a a gallery showing where all 50 cities rank on a list of home prices versus rents. less Construction workers align Seattle's famous Wonder Bread sign on top of the Pratt Park apartment building on July 16, 2010. | See a a gallery showing where all 50 cities rank on a list of home prices versus ... more Photo: Thom Weinstein/seattlepi.com Photo: Thom Weinstein/seattlepi.com Image 1 of / 1 Caption Close Seattle is second-worst city to buy versus rent 1 / 1 Back to Gallery

Seattle's home prices are the second-worst bargain, compared with rents, among the largest 50 U.S. cities, according to a new report.

Specifically, the median cost to buy a two-bedroom apartment, condominium or townhouse in Seattle is 24 times the median annual rental cost for a similar home, real estate website Trulia.com reported Monday. Only New York was higher, with a median price 31 times the annual rent.

That's in contrast with 72 percent of the largest U.S. cities, where buying a home is now more affordable than renting, according to Trulia, which defined this as a cost up to 15 times the annual rent. Here's a gallery showing where all 50 cities rank.

"Since the start of the 'Great Recession,' many former homeowners have flooded the rental market," Trulia founder and Chief Executive Officer Pete Flint said in a news release. "Following the principles of supply and demand, renting has become relatively more expensive than buying in most markets.

"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 found that buying was somewhat more expensive than renting in 10 cities and much more expensive in just four: New York, Seattle, Kansas City and San Francisco.

Coastal markets like Seattle and San Francisco have many affluent families that support higher prices, Tara-Nicholle Nelson, a Trulia consumer educator, said in an interview. "I would be really surprised if it ever becomes significantly cheaper to own in any of these cities than rent."

Cities where it's more expensive to buy than rent tend to have strong job markets and more people moving in than out, Nelson said. This has tended to be true, relatively speaking, in Seattle.

So does that mean people shouldn't buy a home in Seattle?

"This is not a measure of whether it's better or worse, or whether it makes more or less financial sense to buy versus rent," Nelson said. She noted that the report doesn't project for rising rents or home prices.

In Seattle, for instance, the median home price was $365,000 in December, down 2.7 percent from a year earlier and 13 percent from December 2008, according to the Northwest Multiple Listing Service. But the average Seattle rent last fall, $1,109, remained virtually unchanged over the same period, and actually rose 2 percent between last spring and fall, according to Dupre + Scott Apartment Advisors.

Many of the places where buying is now more affordable than renting are ones that were hard hit by the housing bust and foreclosure crisis. This includes such cities as Miami (No. 1 on the affordability list), Las Vegas (No. 2), Phoenix (5), Jacksonville, Fla. (6) and Sacramento, Calif. (7).

Some renters are starting to consider buying, Nelson said. "The lifelong renters are seeing affordability and they are perceiving that the window of high affordability may be closing."

At the same time, she added, many longtime owners are losing their homes.

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