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It's Cheaper to Buy Than Rent a Home—Depending Where You Live


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If you're preparing to enter America's piping-hot housing market as a buyer, you're likely very aware of how expensive it is to purchase a home. With owning a home out of reach for so many, renting can provide an affordable, if somewhat less satisfying, consolation prize (after all, who wants to have a landlord when you're in your 40s?).

But the uptick in rents across the country should cause you to reconsider whether sacrificing home ownership actually makes financial sense. A new study by the Urban Institute finds that in 17 metropolitan areas, it's actually cheaper to bite the bullet and buy a house than to rent one. By looking at the median income reported in each city and comparing it with the costs of putting down a 3.5% down payment on a median-priced home vs. renting a home, the study found it cheaper to buy in the following metropolitan areas:

Metropolitan area

Percent of median income spent on mortgage payments with 3.5% down

Percent of median income spent on rent

Detroit-Warren-Dearborn, MI

11.57

21.84

Pittsburgh, PA

14.09

21.28

Philadelphia-Camden-Wilmington, PA-NJ-DE-MD

14.62

21.50

New York-Newark-Jersey City, NY-NJ-PA

32.33

37.18

Chicago-Naperville-Elgin, IL-IN-WI

23.28

27.77

Cleveland-Elyria, OH

14.48

18.21

Cincinnati, OH-KY-IN

16.86

19.64

Tampa-St. Petersburg-Clearwater, FL

26.25

28.03


Miami-Fort Lauderdale-West Palm Beach, FL

41.39

43.03

Houston-The Woodlands-Sugar Land, TX

24.14

25.40


Atlanta-Sandy Springs-Roswell, GA

20.95

22.12

Columbus, OH

19.99

21.21


Charlotte-Concord-Gastonia, NC-SC

23.06

24.11

Minneapolis-St. Paul-Bloomington, MN-WI

20.31

21.20

St. Louis, MO-IL

17.08

17.62

San Antonio-New Braunfels, TX

23.88

24.10

Kansas City, MO-KS

18.47

18.67

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If you happen to have an allergic reaction to numbers and charts (perfectly understandable, but something you'll need to get over when trying to buy a house), here's a more concrete example using the data above to put things in perspective. If you bought a $175,000 house in Columbus, Ohio, and took out a 30-year fixed-rate mortgage with a 3.5% down payment (the smallest amount of down payment allowed with a Federal Housing Assistance loan), then your spending roughly 20% of your income on paying that mortgage. Assuming you earn $52,000 a year, close to the median income in Columbus, then that means $10,400 of your money is dedicated to mortgage payments. If you rented a three-bedroom house in Columbus, you would pay $11,029 a year in rent. The discrepancy is even larger almost 200 miles east, in Pittsburgh, Pennsylvania. Buying a house in the Steel City under similar circumstances means your mortgage costs you about $7,900 a year, while renting costs around $12,250 every year.

The decision between buying and renting a home doesn't solely boil down to how much money you spend—owning a home comes with other costs that renters dodge, including property taxes, home maintenance and homeowners insurance . Then again, the stability of owning a house in a neighborhood you love can be a priceless commodity to some buyers. You'll likely have to consider a whole host of questions—with financial ones being only part of the equation—about your long-term plans for the house, but at least you can make your decision armed with the knowledge that in some desirable cities, buying can be a better deal.


This article, " It's Cheaper to Buy Than Rent a Home—Depending Where You Live " was originally published on ValuePenguin .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Personal Finance , Real Estate , Saving Money



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