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LendingTree Compares Renting and Owning a Home in the 50 Largest Metropolitan Areas in the U.S.

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. Renting can be the best option if a person is not planning on staying in one area for a very long time or does not have enough cash for a down payment. But buying a home can be a good long-term investment.

In any case, cost is one of the biggest factors that people consider when they are choosing between renting and owning. In order to take a closer look at how the cost of renting a home differs from the price of owning one, LendingTree, the nation’s leading online loan marketplace, compared monthly rental and monthly mortgage payments for homes in the 50 largest metropolitan areas in the United States.

Key Findings:

Louisville, Milwaukee and Oklahoma City are the metros where median rents are cheapest when compared to median mortgages. In these areas, median rent costs are an average of $310 cheaper than median mortgage costs.

Miami and Orlando, Fla.; and Virginia are the metros where rent payments are the most expensive when compared to mortgage payments. Median mortgage payments are an average of $215 cheaper than median rent payments in these metros.

Four of the top 10 metros where monthly rents are higher than monthly mortgage payments are in Florida. According to a recent housing study from Harvard University, low wages and too few rental units are key factors that have caused Florida’s rental affordability crisis to become the worst in the nation.

Metros where monthly rent payment is lower than monthly mortgage payments

Louisville

Median monthly rent payment: $866
Median monthly mortgage payment: $1,195
Difference between median monthly rent and median monthly mortgage payment: -$329

Milwaukee

Median monthly rent payment: $925
Median monthly mortgage payment: $1,225
Difference between median monthly rent and median monthly mortgage payment: -$301

Oklahoma City

Median monthly rent payment: $900
Median monthly mortgage payment: $1,200
Difference between median monthly rent and median monthly mortgage payment: -$300

 

Metros where monthly mortgage payment is lower than monthly rent payments

Miami

Median monthly rent payment: $1,477
Median monthly mortgage payment: $1,215
Difference between median monthly mortgage and median monthly rent payment: $262

Orlando, Fla.

Median monthly rent payment: $1,263
Median monthly mortgage payment: $1,036
Difference between median monthly mortgage and median monthly rent payment: $227

Virginia Beach

Median monthly rent payment: $1,318
Median monthly mortgage payment: $1,163
Difference between median monthly mortgage and median monthly rent payment: $155

For average sized houses, buying is usually a better deal. But, for the largest and smallest homes, renting is often cheaper.

How many bedrooms a home has is a major factor in determining both how much it costs to rent and how much it costs to buy. As a result, those who are unsure whether or not they want to rent or buy a home should consider how many bedrooms they need in order to help them make a decision.

Zero-bedroom homes (which include homes like lofts and studios) are cheaper to rent than buy in 39 of the nation’s largest metros. The average median rent for a no-bedroom home is $277 cheaper than the average median mortgage payment for one of these relatively unusual types of properties.

In 33 of the nation’s largest metros it is cheaper to buy a one-bedroom home than to rent a one. The average median mortgage payment for a one-bedroom home is $42 cheaper than the average median rent payment.

Two-bedroom homes are usually cheaper to buy than rent in the nation’s largest metros. It is only cheaper to rent a two-bedroom home in 9 of this study’s 50 metros. Average Median mortgage costs for two-bedroom homes are around $117 cheaper than median rent costs.

For three-bedroom homes (which represent the largest share of homes in the country) median mortgage payments are cheaper than median rent payments. On average, median mortgage payments are approximately $73 cheaper than median rent payments for three-bedroom homes.

It is cheaper to rent a four-bedroom home in 22 of the nation’s largest metros, while it is cheaper to buy in 28. Though it is cheaper to buy a home in the majority of the nation’s metros, areas like New York and Boston mean that the average median rent in the U.S. is $29 cheaper than the average median mortgage cost.

In all but 7 metros it is cheaper to rent a home with five or more bedrooms than it is to buy one. Average median rent costs for five plus bedroom homes are $304 cheaper than average median mortgage costs.

Is it better to rent or to own?

There is not a definitive answer to the question of whether it is better to rent or buy a house. What’s most important is that individuals carefully consider their options before making the choice that is best for them. Below are a few general guidelines that might help shoppers determine whether or not renting or buying is best for them.

People should consider renting if:

  • They do not have enough cash for a down payment. Most buyers need to get a loan from their bank in order to purchase a home. As a result, they usually need to pay cash for a down payment that can be as much as 20%. Buyers without access to this kind of cash will likely have an easier time renting than buying.
  • They are not planning on living in the home/area for very long. Buying a home is usually considered a long-term investment. And depending on the market, selling a home can take months or even years. Therefore, people who don’t plan on staying in an area or in their home for more than a few years will probably be better off renting.

People should consider buying if:

  • They are financially secure. People who have stable employment and are able to put money into savings each month are usually better equipped to afford a home than those who struggle saving money or who don’t have stable employment. Those who are financially secure are also more capable of paying for home costs outside of their mortgage, like insurance or home repairs/renovations.
  • They want an investment for the future. Although buying a home can be expensive, it can also be a good investment. Not only can homeowners take out equity loans on their home if they ever get into a pinch, but the value of their home might appreciate overtime, especially if they stay in the same house for several decades.
  • They qualify for government help like tax breaks and FHA loans. Depending on factors like a buyer’s income or credit score, they might qualify for an FHA loan or tax breaks on their home. FHA loans can greatly reduce the down payment amount and credit score requirements for would-be buyers. Potential buyers, as well as those who already own a home, might qualify for tax breaks under the new tax laws passed in 2017.

If you do decide that buying is right for you, then remember to shop around for a loan before you purchase your home. LendingTree not only lets you compare different loan options, but it also helps you understand what you will need to do in order to be prepared for the homebuying process. Shopping around for a mortgage loan can, in some cases, help you save tens of thousands of dollars over the lifetime of your loan.

Methodology

To conduct this study, LendingTree used data from the U.S. Census’ Bureau to determine the median cost to own and rent a home in the nation’s 50 largest metro statistical areas or “MSAs.” Using the Census Bureau data, this study found both the average median rent and average median mortgage cost in each of the nation’s 50 largest metros.

The metros in this study are ranked based on the difference between the median monthly rent and median monthly mortgage cost in a given area. As a result, a negative number in a graph indicates that rent is cheaper in a metro, while a positive metro indicates that mortgages are cheaper. Median monthly mortgage costs include both taxes and insurance costs.

 


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