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LendingTree Compares Renting and Owning a Home in the Nation’s 50 Largest Metropolitan Areas

Finding a place to live can be challenging — and so can choosing between renting or buying a home. Each option has its advantages and disadvantages, especially in the wake of the COVID-19 pandemic, when many people are struggling to pay their monthly housing costs.

To highlight some of the key differences between renting and owning, LendingTree looked at the median monthly cost to rent and to own a home, for homeowners with and without mortgages, in the nation’s 50 largest metros. In doing so, LendingTree found that renting is usually cheaper than owning until a person has paid off their mortgage.

In addition to comparing costs, LendingTree also looked at who may be better off renting versus buying.

Key findings

  • If you’re still paying off your mortgage, renting is cheaper than owning in each of the nation’s 50 largest metros. On average, renting is $607 cheaper than owning across the nation’s largest metros.
  • New York, San Francisco and San Jose, Calif., are the metros where the spread in costs between renting and owning a home with a mortgage is the widest. In these three metros, it’s about $1,200 cheaper, on average, to rent versus owning a home while paying off a mortgage.
  • Orlando, Fla, Tampa, Fla. and Indianapolis are the metros where the gap between renting and owning a home with a mortgage is the narrowest. In these metros, renters can save an average of $336 a month.
  • San Jose, Calif., San Francisco and San Diego are the metros where the spread in costs between renting and owning a home without a mortgage (that is, a home whose mortgage is fully paid) is the widest. Owners in these three areas can save an average of $1,146 a month in housing costs.
  • Providence, R.I., Milwaukee and Buffalo, N.Y. are the metros where the gap between renting and owning a home without a mortgage is the narrowest. In these metros, owners who have paid off their mortgage can save an average of $250 a month.
  • There are numerous reasons why the cost of renting and buying a home can differ so drastically. These reasons depend on a variety of factors, including the types of housing available, consumers’ financial profiles, property taxes, cost of living and the local housing zoning laws.

Metros where the spread in costs between renting and owning a home with a mortgage is the widest

No. 1: New York

Median monthly gross rent: $1,391

Median monthly housing costs for homes with a mortgage: $2,731

Difference between median monthly gross rent and median monthly housings costs for homes with a mortgage: -$1,340

No. 2: San Francisco

Median monthly gross rent: $1,790

Median monthly housing costs for homes with a mortgage: $2,953

Difference between median monthly gross rent and median monthly housings costs for homes with a mortgage: -$1,163

No. 3: San Jose, Calif.

Median monthly gross rent: $2,108

Median monthly housing costs for homes with a mortgage: $3,198

Difference between median monthly gross rent and median monthly housings costs for homes with a mortgage: -$1,090

Metros where the spread in costs between renting and owning a home with a mortgage is the narrowest

No. 1: Orlando, Fla.

Median monthly gross rent: $1,161

Median monthly housing costs for homes with a mortgage: $1,457

Difference between median monthly gross rent and median monthly housings costs for homes with a mortgage: -$296

No. 2: Tampa, Fla.

Median monthly gross rent: $1,070

Median monthly housing costs for homes with a mortgage: $1,419

Difference between median monthly gross rent and median monthly housings costs for homes with a mortgage: -$349

No. 3: Indianapolis

Median monthly gross rent: $888

Median monthly housing costs for homes with a mortgage: $1,252

Difference between median monthly gross rent and median monthly housings costs for homes with a mortgage: -$364

Metros where the spread in costs between renting and owning a home without a mortgage is the widest

No. 1: San Jose, Calif.

Median monthly gross rent: $2,108

Median monthly housing costs for homes without a mortgage: $751

Difference between median monthly gross rent and median monthly housings costs for homes without a mortgage: $1,357

No. 2: San Francisco

Median monthly gross rent: $1,790

Median monthly housing costs for homes without a mortgage: $683

Difference between median monthly gross rent and median monthly housings costs for homes without a mortgage: $1,107

No. 3: San Diego

Median monthly gross rent: $1,569

Median monthly housing costs for homes without a mortgage: $595

Difference between median monthly gross rent and median monthly housings costs for homes without a mortgage: $974

Metros where the spread in costs between renting and owning a home without a mortgage is the narrowest

No.1: Providence, R.I.

Median monthly gross rent: $945

Median monthly housing costs for homes without a mortgage: $698

Difference between median monthly gross rent and median monthly housings costs for homes without a mortgage: $247

No. 2: Milwaukee

Median monthly gross rent: $885

Median monthly housing costs for homes without a mortgage: $636

Difference between median monthly gross rent and median monthly housings costs for homes without a mortgage: $249

No. 3: Buffalo, N.Y.

Median monthly gross rent: $786

Median monthly housing costs for homes without a mortgage: $533

Difference between median monthly gross rent and median monthly housings costs for homes without a mortgage: $253

Is it better to rent or to own?

If you’re struggling with the decision to rent versus buy, keep in mind that there’s no right or wrong answer. Carefully consider your budget, lifestyle and financial goals in order to choose the option that’s best for you.

Below are some considerations to help you decide whether to rent or buy a home.

Consider renting if:

  • You don’t have enough cash for a down payment. Most homebuyers need to get a loan in order to purchase a home. As a result, they usually need to pay cash for a down payment. Depending on your budget and savings, you may not have enough money for a down payment and find that it’s more feasible to rent than buy.
  • You’re not planning on living in the home for very long. Buying a home is typically a long-term investment. And depending on the market, selling a home can take months or even years. If you don’t plan on staying in an area long-term, or simply want the freedom of being able to pick up and move for a new job or a change of pace, you may be better off renting.
  • You don’t want the hassle and expense of maintaining a home. Buying a home involves more than the mortgage payment. If you don’t want to be saddled with the financial responsibility of paying for repairs or maintenance, renting will put that responsibility on your landlord’s shoulders.

Consider buying if:

  • You’re financially secure. If you have a stable employment history and steady income, and you’re able to put money into savings each month, you’re more likely to be able to repay your mortgage. However, if you struggle with saving money or your income isn’t steady, buying a home may be riskier.
  • You want an investment for the future. Although buying a home can be expensive, it can also be a good investment in the long run. The longer you stay in your home, the more equity you’re likely to build over time as you pay down your mortgage and home values appreciate. You can even tap this equity with a home equity loan to make value-added improvement or achieve another financial goal.
  • You’ll reap certain tax benefits. Homeowners qualify for tax deductions that can help lower their federal tax bill. For example, under tax laws passed in 2017, you can deduct the interest paid on up to $750,000 of mortgage debt if you’re an individual taxpayer or a married couple filing a joint tax return if you itemize deductions. Other potential tax breaks include deductions for mortgage discount points, property taxes and having a home office.
  • You’re willing to shop around for the best loan offer before buying. Homebuyers who shop around for a mortgage can save tens of thousands of dollars over the life of their loan, and lower their monthly payments.

Methodology

To conduct this study, LendingTree used data from the U.S. Census Bureau’s 2018 American Community Survey with 5-year estimates to determine the median costs to own and rent a home in the nation’s 50 largest metro statistical areas, or “MSAs.”

The housing cost variables used in this study — “median monthly gross rent” and “median monthly housing costs with/without a mortgage” — include the total monthly cost that a person who is renting or owning incurs, including utilities, fees and/or taxes.

By subtracting the median monthly housing costs in each metro for both those who have a mortgage and those who do not and own their home outright, by the median monthly gross rent in each metro, LendingTree was able to create the two rankings featured in this study.

LendingTree research analyst Jacob Channel contributed to this study.

 

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