Since the coronavirus pandemic took the shine off expensive (and cramped!) urban living, rents have tanked in some of the nation’s top cities. But when it comes to whether it makes more financial sense to buy a home or rent one, it turns out that, in many cases, buying is still your best bet.
In more than 15 of the 50 largest metros, buying a home was as or more affordable than renting in January 2021, according to a recent realtor.com® report, up from 13 markets before the pandemic. And, on top of that, there are several “borderline” cities where the monthly cost of buying a home is within 5% of the cost of the local median rent.
Even with the historic growth in home prices over the past year, the monthly cost of buying a home in many cities across the United States hasn’t changed—mostly because of incredibly low interest rates that dropped to 2.88% in January.
The economics team at realtor.com looked at the 50 largest metros, ranked by the number of households, to put together the report. It compared the monthly cost of buying a home with a 30-year fixed-rate mortgage at each city’s median listing price, including taxes and insurance, against the monthly rent for two- to four-bedroom apartments and houses in the area. Then the team ranked those numbers to see how they stacked up to local incomes. (Metro areas typically include a city and smaller nearby municipalities; the Chicago metro includes Elgin and Naperville.)
Cities in the Midwest and South tend to offer cheaper homes and a lower cost of living than coastal California and other big tech hubs like Austin, TX, and Seattle. That’s because land is often cheaper and more abundant, construction is less expensive, zoning regulations are often fewer, plus some cities just don’t have as much demand for housing.
“Some of these, they’re Rust Belt markets. Each one of these markets has a net population loss, so that, of course, is going to create an abundance of supply and lower demand than a place that has a net population gain,” says James Wise, an Ohio-based real estate broker and host of HoltonWiseTV.
And yet overall, the number of places where it makes more sense to rent is higher. Looking at the 50 largest metros, the monthly cost to purchase a median home in January 2021 was $1,988, compared with the median monthly rent of $1,727.
But notoriously expensive California and other West Coast metros lead the list of the highest-priced cities where, financially, it makes more sense to rent because the monthly cost of a mortgage far exceeds the median rent. These places also tend to have incomparable natural beauty and outdoor access and are popular vacation destinations. Two had median list prices over $1 million.
These more expensive markets tend to have a higher share of well-paying (often tech) jobs occupied by a high concentration of young professionals who have plenty of cash to spend.
“Wherever there are high-paying jobs and employers supporting them, you’re beginning to see higher-end rental complexes that can start at $3,500,” says Ramesh Rao, a Coldwell Banker Global Luxury agent based in Silicon Valley. “When these people start looking at buying a median price home, their total cost toward any kind of roof over their head goes up two times.”
But for many of these folks, Rao says, it just feels better to pay $3,500 toward equity than give it to someone else. Throw in the tax savings and potential appreciation, that’s what keeps people buying these pricey places despite the monthly math.
So where are the best places to buy a home, or to rent one? Take a look.
Top 10 metros to buy a home
- Cleveland, OH ($198,000)
- Chicago, IL ($338,000)
- Pittsburgh, PA ($245,000)
- Riverside, CA ($485,000)
- Miami, FL ($400,000)
- New Orleans, LA ($320,000)
- Baltimore, MD ($325,000)
- Tampa, FL ($302,000)
- Hartford, CT ($303,000)
- Detroit, MI ($265,000)
Top 10 metros to rent a home
- San Jose, CA ($1,199,000)
- Austin, TX ($460,000)
- Sacramento, CA ($599,000)
- Seattle, WA ($665,000)
- San Francisco, CA ($990,000)
- Los Angeles, CA ($1,150,000)
- San Diego, CA ($850,000)
- Portland, OR ($525,000)
- Oklahoma City, OK ($278,000)
- Richmond, VA ($388,000)
(monthly buying costs within 5% of renting costs)
- Atlanta, GA ($365,000)
- Orlando, FL ($320,000)
- Birmingham, AL ($264,000)
- Phoenix, AZ ($455,000)
- Buffalo, NY ($240,000)
- Memphis, TN ($244,000)
- Washington, DC ($500,000)
- Las Vegas, NV ($345,000)
- Milwaukee, WI ($320,000)
FIRST TIME HOMEBUYERS
Tags used in this real estate lawyer news blog post:
#Closing #Attorney #Boston #ClosingAttorney #ma #RealEstate #HomeBuying #Attorney #Lawyer #Law
McDevitt Law Group strives to provide the highest quality real estate law and estate planning services, and we have for almost 40 years. As a small law firm, we pride ourselves on providing personal attention to your case and providing the highest quality representation. Call us today, or use the contact form below.
Barnstable County | Bristol County | Duke County | Essex County | Middlesex County | Nantucket County | Norfolk County | Plymouth County | Suffolk County
Just click on the Phone Number to dial on your phone: