For many American families, moving from renting to home ownership has become considerably more difficult as a result of the housing affordability issue, according to new Creditnews data.
In reality, the monthly cost difference between owning a home and renting, given current mortgage rates and home prices, can reach $10,000 in some major cities. But in what way?
Key Findings:
- All costs included, owning a home is more expensive than renting in all of America’s 100 most populous metro areas.
- The monthly cost difference between homeownership and renting varies greatly across the country. It can be as high as $11,303 in San Jose, CA, and as low as $567 in Jackson, MS.
- The metros with the highest homeownership costs relative to renting are mainly located on the West Coast, in Hawaii, and parts of the Northeast.
- Meanwhile, the metros with the smallest difference between homeownership costs and renting are in the South and Rust Belt.
- Excluding other housing expenses, mortgage payments are lower than the average rent in 22 of the metros. That’s another reminder for homebuyers to consider all housing costs before pulling the trigger.
Many renting vs. buying studies only take mortgage costs into account. The mortgage itself, however, is only one aspect of homeownership expenses—as many homeowners are aware.
The analysis offers a far more thorough rent vs buy comparison by accounting for all costs associated with buying, such as taxes, insurance, HOA dues, and remodeling expenses in America’s 100 most populated metro areas and contrasted average rent pricing with those costs.
Where Does It Make the Most Sense to Purchase a Home?
The top 10 metros with the smallest difference between renting and total homeownership costs:
- Jackson, MS
- El Paso, Texas
- Toledo, OH
- New Orleans-Metairie, LA
- Pittsburgh
- McAllen-Edinburg-Mission, Texas
- Syracuse, NY
- Scranton-Wilkes-Barre, PA
- Cleveland-Elyria, OH
- Augusta-Richmond County, GA-SC
Because their property prices are far lower, the most buyer-friendly metro areas have the smallest disparity between their overall housing expenditures and their rent.
In all of these metro areas, homeownership still costs more than renting, but the difference is less than $900. For homeowners who are building equity by owning a home rather than renting, that’s a fair trade-off.
1. Jackson, MS
The disparity between average rent and total housing costs is lowest in Jackson. Because the average property price in the area is less than $200,000, residents only have to pay $567 more each month to purchase a home.
2. El Paso, Texas
The second-most homeowner-friendly metro area is El Paso. Due in significant part to decreased home prices and comparatively higher rent costs, residents incur additional $646 in monthly homeownership expenditures. more every month to be a homeowner—because the average home costs less than $200,000.
3. Toledo, OH
Toledo, the first Midwestern metropolis in the top 10, provides good value for prospective homeowners. At $189,228 for a typical property, one can afford the modest mortgage payment of $1,070. Renters pay $1,220 on average per month, which is $710 less than what owners spend.
4. New Orleans-Metairie, LA
In New Orleans, Louisiana, the total monthly cost of homeownership is $2,395 while the monthly cost of rent is $1,678. In other words, people only spend an additional $717 to own a home.
5. Pittsburgh
Pittsburgh is reasonably priced for both tenants and homeowners. With an average home price of $217,285 comes $2,178 in total costs associated with owning. That is only $718 more than the rent.
6. McAllen-Edinburg-Mission, TX
Affordable real estate is available in McAllen, the second-ranked Texas metro area in the top 10. It is one of three metro areas where rent for a whole month is less than $2,000. There is a $727 monthly difference between rent and buying.
7. Syracuse, NY
The upstate metro area of Syracuse, New York, is among the most cheap for homeowners, in sharp contrast to New York City. The average monthly cost of homeownership in Syracuse is $2,295, which is $740 more than the average monthly rent.
8. Scranton-Wilkes-Barre, PA
Rent in Scranton is reasonably priced at $1,276 per month, and buying a property doesn’t cost much more. The monthly total is $2,056, which is only $780 more than rent.
9. Cleveland-Elyria, OH
Cleveland, the second Ohio metro in the top 10, has cheaper housing and smaller mortgage payments than the majority of the nation. Instead of renting, residents pay $874 more a month for property ownership.
10. Augusta-Richmond County, GA-SC
Augusta, whose average monthly homeownership expenses are $2,331, completes the top ten. In contrast, the average monthly rent in this metro area is $1,436, meaning that renting is $895 less expensive than owning a home.
Where Does it Makes the Most Sense to Rent?
The top 10 metro areas with the biggest price differential between total homeownership and rental expenses:
- San Jose-Sunnyvale-Santa Clara, CA
- San Francisco-Oakland-Berkeley, CA
- Los Angeles-Long Beach-Anaheim, CA
- San Diego-Chula Vista-Carlsbad, CA
- Urban Honolulu, HI
- Oxnard-Thousand Oaks-Ventura, CA
- Seattle-Tacoma-Bellevue, WA
- Denver-Aurora-Lakewood, CO
- Salt Lake City, UT
- Boston-Cambridge-Newton, MA-NH
The largest disparity between rent and homeownership expenses is found in the least buyer-friendly metro areas.
As a matter of fact, the typical rent prices in these metro areas are 62% to 164% more than mortgage payments alone. The difference, when all expenses are taken into account, can reach an astounding $11,303.
San Jose, California, is the metro area with the biggest disparity between average rent and total housing expenditures. The cost of property ownership in San Jose is an astounding $11,303 more per month for inhabitants. Even though San Jose rent is highly pricey on average ($3,360 per month), it’s still far less expensive than buying a property.
The following California metro areas made the list: Oxnard, Los Angeles, San Francisco, and San Diego. The cost of homeownership in these places is between $4,961 and $7,615 higher than that of renting. Outside California, urban Honolulu, Seattle, Denver, Salt Lake City, and Boston are also among the 10 least homebuyer-friendly metros.
Mortgage Expenses vs. Rent Costs
Mortgage payments are by far the largest monthly expense of homeownership, despite the fact that there are numerous other fees involved as well.
According to Creditnews estimates, some 78 of the top 100 metro areas have mortgage payments that are more than average rentals. These metro areas are topped by Urban Honolulu, Hawaii, and the California metros of San Jose, San Francisco, Los Angeles, and San Diego.
The average monthly mortgage payment in each of these metro areas is at least $1,000 more than the average rent. Conversely, in 22 metro areas—New Orleans, Jackson, MS, El Paso, Texas, Chicago, IL-IN-WI; Syracuse, NY; and Pittsburgh—the mortgage payment is less than the average rent payment.
Click here to see the top 10 metros where homeowners have the biggest savings compared to renting, as well as more data, charts, and methodology.
