Top 10 Cities Where Houses Are a Bargain Compared to Renting
Amid higher mortgage rates and rising home prices, the rebound in the housing market has slowed in recent months. Affordability levels have suffered, but in many areas of the country, it is still cheaper to buy a house than rent. According to a new report from Trulia, home ownership is 35 percent cheaper than renting on a national basis. In fact, buying is the more affordable option in America’s 100 largest metropolitan areas — primarily the result of mortgage rates and prices remaining below long-term historical norms. Buying ranges from being 65 percent cheaper in the Midwest to only 4 percent cheaper on the West coast.
“Recent mortgage rate and home price increases have made buying significantly more expensive than last year, but not enough to tip the math in favor of renting,” said Jed Kolko, Trulia’s Chief Economist. “If mortgage rates rise above 5 percent, the first housing markets to tip in favor of renting would be San Jose, San Francisco, and Honolulu. Nationally, however, mortgage rates would have to reach into double-digits before renting becomes cheaper than buying.”
The study compares the cost of owning and renting by assuming: people receive a 4.8 percent mortgage rate on a 30-year fixed-rate loan, put 20 percent down, itemize their federal tax deductions and are in the 25 percent tax bracket, and stay in the house for seven years. It also takes into consideration maintenance costs, but obviously not personal factors like job security. Here’s a look at the top 10 cities where buying a home is a bargain when compared to renting. Negative numbers indicate that buying costs less than renting.