Falling home prices prompt renters to consider buying

For Americans debating whether to buy or rent their homes, the scales are tipping toward ownership. Because of the slide in home prices, low interest rates, and tax incentives, renters are realizing they could handle a mortgage for a just little more money.

An Associated Press analysis of 45 metro areas finds the gap between the monthly mortgage payment on a median-priced home and the median rent has shrunk from $777 a month to just $221 in the past three years.

It could mean a quicker end to the housing-market doldrums, as renters buy up unsold homes languishing on the market.

In some metro areas, including Cleveland, Atlanta, Indianapolis, and St. Louis, the gap was less than $100 a month. Home prices are expected to fall faster than rents this year, meaning the gap should get even smaller.

In once-inflated markets like Phoenix, Las Vegas, and inland swaths of California and Florida, where prices have tumbled more than 40 percent, sales are rising because first-time homebuyers are snapping up bargain-priced homes.

They are getting help from a federal tax credit that covers 10 percent of the home price or up to $8,000 for first-time buyers who earn up to $75,000 a year, or $150,000 for a couple. The credit expires at the end of November.

Cheap foreclosures in some of those markets are now drawing multiple bids. As supply and demand even out, home prices will eventually begin to rise. But for now buyers are having little trouble finding bargains.

Jere Ross, an Air Force vehicle operator, and his wife recently bought a four-bedroom, 1.5-bath house in Zephyrhills, Fla., a Tampa suburb, for $86,500 rather than jump into another yearlong apartment lease.

Ross, 23, used a Veterans Administration loan, which doesn’t require a down payment, and got a 30-year mortgage at a fixed rate of 5.5 percent. His monthly payment comes to $700 a month, including property taxes and insurance - $110 less than he paid to rent an apartment half the size.

“It just came to a point where we were just throwing our money away on rent,’’ Ross said. “When it came to find out that we could own this house for, less than what we’re paying in rent, it was a ‘no duh!’ kind of moment.’’

Renters with jobs in the education, retail, and transportation industries don’t earn enough to rent a two-bedroom apartment in many of these major cities, let alone buy, according to a recent study of 200 metro areas by the Center for Housing Policy.