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

A new study reveals that in cities such as Philadelphia and New York, you save money in the long-run by owning your home.
These brownstones in Brooklyn could actually be cheaper to buy than rent.

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 areaPercent of median income spent on mortgage payments with 3.5% downPercent of median income spent on rent
Detroit-Warren-Dearborn, MI11.5721.84
Pittsburgh, PA14.0921.28
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD14.6221.50
New York-Newark-Jersey City, NY-NJ-PA32.3337.18
Chicago-Naperville-Elgin, IL-IN-WI23.2827.77
Cleveland-Elyria, OH14.4818.21
Cincinnati, OH-KY-IN16.8619.64
Tampa-St. Petersburg-Clearwater, FL26.2528.03

Miami-Fort Lauderdale-West Palm Beach, FL
Houston-The Woodlands-Sugar Land, TX24.1425.40

Atlanta-Sandy Springs-Roswell, GA
Columbus, OH19.9921.21

Charlotte-Concord-Gastonia, NC-SC
Minneapolis-St. Paul-Bloomington, MN-WI20.3121.20
St. Louis, MO-IL17.0817.62
San Antonio-New Braunfels, TX23.8824.10
Kansas City, MO-KS18.4718.67

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.

James Ellis is a former Staff Writer for ValuePenguin, covering credit, banking, travel and other personal finance topics. He previously wrote for Newsweek, Men's Health, and other nationally-published magazines.

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