While there are many factors involved in such a decision, if it boils down to whether buying makes financial sense given current market conditions a good gauge is the price-to-rent ratio.
The price-to-rent ratio is the cost of the median home divided by a year's median rent. Median price of a home in the 13-county Minneapolis-St. Paul area was $150,000 at the end of 2011. Median rent was $1,100/month or $13,200 annually. Dividing $150,000 by $13,200 gives a ratio of 11.36.
So what does that mean? The classic rule of thumb is that when the ratio is over 20 you should rent… 15-20 you could go either way… under 15 it makes more sense to buy. At the peak of the bubble the ratio was 21.69… long-term average from 1989 to 2003 was 13.48.
At 11.36 the price-to-rent ratio is below both the peak and the long-term average, which seems to tip the scale towards buying vs renting.
Sharlene Hensrud, RE/MAX Results – Minneapolis – St. Paul Buyer's Agent