Buying costs less than renting........

Rising mortgage rates and home prices have narrowed the gap between renting and buying, though rates have recently dropped and price gains are slowing.

Low mortgage rates have kept homeownership from becoming more expensive than renting. In some markets, like San Francisco and Seattle, rents have risen sharply; rising rents hurt affordability relative to incomes, but rising rents make buying look cheaper in comparison.

Trulia says that at a 30-year fixed rate of 4.5%, buying is 38% cheaper than renting nationally, versus being 44% cheaper at the start of 2013.

(While renting is more expensive, only half of potential homebuyers have credit that would get such a rate, and many first-time homebuyers are struggling to form households or get out from under student debt.)

The range of difference, as one expects, varies from market to market – buying is only 5% cheaper than renting in Honolulu, while it is 66% cheaper than renting in Detroit.

Trulia’s interactive Rent vs. Buy Map shows how the math changes under alternative assumptions for the mortgage rate, the income tax bracket for tax deductions, and the number of years that one stays in the home.

To compare the costs of owning and renting, Trulia’s model assumes buyers get a 4.5% mortgage rate on a 30-year FRM with 20% down payment. Further, it assumes buyers itemize their federal tax deductions and are in the 25% tax bracket; and will stay in their home for seven years.

Under these assumptions, buying is 38% cheaper than renting nationwide, taking into account all of the costs and proceeds from buying or renting over the entire seven-year period.