Buy vs. Rent in Honolulu?
Trulia.com released its latest buy vs. rent report this past Monday, and while I think Honolulu’s ranking is something of a head-scratcher (more on that in a minute), perhaps the biggest takeaway was the fact that, according to the report, it’s currently more affordable to buy than to rent a two-bedroom home in 72 percent of America’s 50 largest cities. In fact, there are only four cities in the country where it’s more affordable to rent versus buy—New York, Seattle, Kansas City and San Francisco. Meanwhile, hordes of people are flooding the rental market as a result of foreclosure or financial difficulties.
Honolulu, interestingly enough, was listed as being less expensive to buy than to rent, coming in at No. 18 on the list with a rent-to-buy ratio of 13. The ratio is determined by comparing the median list price with the median rent. Now, most of you are probably shaking your heads right now. I mean, since when is a median home price of about $592,000 (the most recent figure for Honolulu) considered affordable? Turns out, Trulia determined Honolulu’s list price to be between $400,000 and $500,000 by calculating the median list price for two-bedroom apartments, condos and townhomes that were listed on Trulia.com. Now, that number differs from those released in the Honolulu Board of Realtors’ 2010 resale statistics, which lists the median sales price for condominiums at $305,000. However, keep in mind that this figure includes studios, one bedrooms, two bedrooms and up.
The company then determined the median annualized rent for two-bedroom apartments, condos and townhomes in Honolulu to be between $3,000 and $3,500, based, again, on listings pulled from Trulia.com. Now, according to data I received from Prudential Locations, the median rent for a two-bedroom apartment on Oahu in the second quarter of 2010 was $1,495. The most expensive neighborhoods for two-bedroom rentals—Hawaii Kai/Portlock, Kahala and Diamond Head—rented for between $2,150 and $3,150. So, Trulia’s $3,000 to $3,500 range seems high to me.
Additional factors that were taken into account when determining the buy-to-rent ratio include the unemployment rate (5.4 percent), foreclosure rate (.07 percent) and percentage of job growth (.8 percent).
All in all, I think Trulia’s index is fun afternoon reading, and it does point to some interesting trends, however I question its accuracy with regards to the Honolulu market. I would venture to say that most residents would not agree that it’s more affordable to buy in Honolulu than to rent. What do you think? Send your thoughts, criticisms and insights to email@example.com.
For a handy interactive map of Trulia.com’s Rent vs. Buy index, click here.