By Alex Veiga, AP Real Estate Writer
LOS ANGELES (AP) — Thinking of buying a home? Consider this: The gap between monthly rents and mortgage payments is at its lowest level in almost 20 years.
In some markets, the difference can be less than $100, according to a national study conducted for The Associated Press by Marcus & Millichap Real Estate Investment Services.
The study, part of a week-long look at homeownership by the AP, found years of falling home prices and low interest rates have created the ultimate buyer's market. But while buying a home is more affordable, it isn't necessarily easier.
Tougher lending standards have made it harder to qualify for a home loan, and unemployment is at 9.7%. Tax incentives for homebuyers will expire April 30, and interest rates are expected to increase this year.
"Statistically, it's a great time to buy," said Hessam Nadji, managing director of Marcus & Millichap. "Psychologically, the consumer doesn't feel like it's a great time to buy."
The analysis of 45 metro areas found the difference between the monthly mortgage payment on a median-priced home and the median rent is down to $256. The last time that gap was anywhere near that small was in 1993 when it fell to $264, according to the study.Marcus & Millichap used median prices for the last three months of 2009 and calculated mortgage payments by assuming a 10% down payment and a 30-year fixed loan at 5.07%, among other factors. It also assumed borrowers paid for private mortgage insurance and didn't include repair costs and tax benefits.
In Detroit, which has been hard hit by unemployment and falling home values, it's cheaper to rent than own, though not by much — $75.
The difference is less than $200 a month in markets such as foreclosure-ravaged Las Vegas, Atlanta, Cleveland, Indianapolis and Orlando, Fla.
Renting remains far more affordable than owning in traditionally pricer markets such as New York. In Manhattan, the gap is more than $4,000. Renters will save $1,000 or more a month in metro areas such as Los Angeles, Seattle, San Diego, San Francisco and San Jose, Calif.
But even in some of these markets, longtime renters are testing the market.