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April 18, 2012 Owning versus Renting a Single Family Home Own versus Rent Ratios for Twenty-Six Cities in Greater Phoenix By Fletcher Wilcox Real Estate Analyst Grand Canyon Title Agency, Inc. FWilcox@GCTA.com 602-648-1230

April 18, 2012: The cost to own versus paying rent for a single family home has gone up. In March 2012 the Own versus Rent ratio was 11.0 compared to 8.7 in March 2011. The lower the ratio the better to own, and the higher the ratio the better to rent. While there are many factors to consider whether to own or to rent, the Own versus Rent Ratio highlights trends between purchase price and rent indicating whether owning or renting is less expensive. The lower the ratio the better to own and the higher the ratio better to rent. All the ratios in this report calculate only single family homes and do not include patio homes, townhouses, etc. Calculating Own versus Rent Ratios The ratio is calculated by annualizing the median monthly rent and then dividing the median purchase price by the annualized rent. A sample calculation is as follows: Median purchase price $100,000. Median monthly rent $1,000. Monthly rent of $1,000 is annualized by multiplying by twelve months which equals $12,000. The purchase price of $100,000 is divided by $12,000 and the Own to Rent Ratio is 8.3

Own versus Rent Ratios for Twenty-Six Cities in Greater Phoenix By Fletcher Wilcox, Grand Canyon Title Agency, Inc.

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Interpretation Key Ratio of 1-15: Owning less expensive than renting. Owner should take into consideration things such as the length of time they will live in the home, closing costs, HOA fees if any, maintenance costs, etc., and compare against cost to rent. Ratio 16-20: Renting may make more sense but owning may be better depending on circumstances such as the use of the mortgage interest tax deduction. Ratio over 20: Renting less expensive than buying. Historical Perspective For single family homes in Maricopa County the overall Own to Rent ratio was 21.2 in March 2005 compared to 8.7 in March 2011, and with recently rising prices the ratio went up to 11.0 in March 2012. Own versus Rent Ratio for Single Family Homes in Maricopa County for the Last Thirteen Months of March Maricopa County Own versus Rent Ratio for the Month of March Data from ARMLS 25.0 20.0

19.0

15.0 10.0

10.6

9.9

9.5

11.8

21.2

20.4 16.3

13.4 9.1

10.5

11.0

8.7

5.0 0.0 2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Median Purchase Price for Single Family Homes in Maricopa County for the Last Thirteen Months of March Maricopa County Median Sale Price for the Month of March Data from ARMLS 300000 250000 200000 150000 100000 50000 0

280000282000 234000

228000 137000 142500 145000

2000

2001

2002

156000 169000

2003

2004

2005

125000

2006

2007

Own versus Rent Ratios for Twenty-Six Cities in Greater Phoenix By Fletcher Wilcox, Grand Canyon Title Agency, Inc.

2008

2009

145000

2010

145000 125000

2011

2012

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Owning versus Renting a Single Family Home Ratios for Twenty-Six Cities in Greater Phoenix Cities ranked by Own versus Rent Ratio

City Own versus Rent Ratio 7.5

1

Coolidge/Florence

2

El Mirage

7.8

3

Phoenix

8.2

4

Glendale

8.7

5

Tolleson

8.8

6

Laveen

8.9

7

Casa Grande

9.3

8 9

Avondale Mesa

9.5 9.6

10

Maricopa

9.6

11

Buckeye

10.2

12

Queen Creek

10.3

13

Peoria

10.6

14

San Tan Valley

10.7

15

Chandler

11.2

16

Tempe

11.5

17

Sun City

11.8

18

Gilbert

12.0

19

Cave Creek

12.2

20

Goodyear

12.2

21

Surprise

12.3

22

Litchfield Park

12.5

23

Paradise Valley

14.3

24

Fountain Hills

14.7

25

Anthem

14.9

26

Scottsdale

16.5

Ratio of 1-15: Owning less expensive than renting. Ratio 16-20: Renting may make more sense but buying may make sense depending on circumstances. Over 20: Renting less expensive than buying.

The data used for the ratios is from the Arizona Regional Multiple Listing Service, Inc. (ARMLS) Own versus Rent Ratios for Twenty-Six Cities in Greater Phoenix By Fletcher Wilcox, Grand Canyon Title Agency, Inc.

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Conclusion The Own to Rent Ratio is a relationship between purchase price and rent. If the rent goes up and the purchase price stays the same the ratio goes down. If purchase price go up and the rent stays the same the ratio goes up. While there are many factors to consider when comparing whether to own or to rent, the Own to Rent Ratio may be used as a starting point. See your real estate agent for more information.

The statistics in this report are based on information from the Arizona Regional Multiple Listing Service, Inc. This report is for real estate agents only. This report does not guarantee the accuracy of the data in this report. Some numbers will change. Report may not reflect all real estate activity. Information should be verified. This article is of a general nature, and is not intended as investment advice, real estate advice, lending advice or legal advice. Please consult your broker, your lender, your own independent legal counsel, your certified public accountant. The information in this report may not be the opinion of Grand Canyon Title Agency, Inc.

Own versus Rent Ratios for Twenty-Six Cities in Greater Phoenix By Fletcher Wilcox, Grand Canyon Title Agency, Inc.

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Fletcher Wilcox Real Estate Analyst at Grand Canyon Title Agency, Inc. Fwilcox@gcta.com 602.648-1230

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Fletcher is proud to be a part of Grand Canyon Title Agency, Inc. The company has been closing escrows in the Valley for thirty years and has seventeen offices. Born and raised in Arizona, Fletcher remained in the state to receive his Bachelor of Science degree and a Master of Arts degree from Arizona State University. Obtained an Arizona Real Estate license in 1985. Co-listed and closed a $2.5 million dollar commercial property in 1986. He is a member of the following associations Arizona State Escrow Association http://www.azsea.org/ Arizona Association of Realtors www.AAROnline.com Scottsdale Area Association of Realtors www.SaarOnline.com Statistician for the Heart of Scottsdale Tour http://www.SaarOnline.com/marketing/scottsdale.php Past education V.P. for the Arizona Mortgage Lenders Association www.AzMortgageLenders.com/ Past statistician for the Scottsdale Luxury Tour http://www.SaarOnline.com/marketing/scottsdale.php Fletcher is author of “Residential Focus" a newsletter which provides statistics and analysis for real estate trends and market conditions in Greater Phoenix; he has been a guest speaker on KTAR, KJZZ/NPR, KFNN, channel 3, channel 10 and channel eight on Horizon http://www.azpbs.org/horizon/detailvid.php?id=3001. His market analysis has been mentioned in the Arizona Republic and AZCentral.com. He is a contributing columnist for the Arizona Journal of Real Estate & Business and has written for the Arizona Association of Realtors publication Arizona Realtor Magazine; He teaches renewal courses on the Residential Resale Real Estate Purchase Contract. From 2006 through 2008 was chairman and MC for the Industry Partners Conference: a conference involving the Arizona Association of Realtors, the Arizona Mortgage Lenders Association and the Arizona State Escrow Association. He served eleven years as a citizen board member on the Phoenix Police Department’s Disciplinary Review & Use of Force Boards. Fletcher joined Alice Cooper’s Solid Rock organization, which promotes the arts to teens, as a board member. He attends Living Streams Christian Church. Fletcher started snowboarding in 2008 going on six trips. He is not very good.

Own versus Rent Ratios for Twenty-Six Cities in Greater Phoenix By Fletcher Wilcox, Grand Canyon Title Agency, Inc.

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Own to Rent Ratios  

Own to Rent Ratios in the Greater Phoenix area

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