It’s no surprise that in general it turns out to be a cheaper monthly rent than the mortgage payment. But just because it’s more common doesn’t mean it always happens. There are some cities in the United States where it is cheaper to buy a home than to rent in 2023.
For many, renting a property is not a decision, it is their only option, due to the high cost of buying a home. Especially within Latino families, owning a home provides financial stability, however, it is a very complicated process with many sacrifices for their wallets. According to a new analysis by real estate company Clever, it will be cheaper to buy a home than rent in 5 of the 50 largest metropolitan areas in the United States by 2023.
Nationwide, home price increases have driven rents to rise by nearly 70% between 2016 and 2023, with the median home price rising from $217,000 to $371,000 during that period.
Just to give you an idea of high home prices, three California metropolitan areas are among the most expensive in the country. San Jose, San Francisco and Los Angeles had the largest median difference between renting and buying in 2023.
For example, in San Jose, the median income is $3,181 while the monthly mortgage payment with an interest rate of 6.8% is $9,372, a difference of $6,191. The difference is $2,802 in Los Angeles and $4,089 in San Francisco.
Over the same period, home prices in the 50 largest metropolitan areas increased by 73%, while rental prices increased by 45%. In 2023, renters in the 50 largest metropolitan areas will save an average of $872 per month compared to non-mortgage payers, according to the report.
The study looked at the price-to-rent ratio, which is calculated by dividing the median home price by the median annual rent, and compared the cost of buying a home to the cost of rent expressed as a ratio. A ratio of 15 or less generally means it’s better to buy, while 21 or more means it’s better to rent.
Despite the fact that renting is cheaper than buying in 45 out of 50 US cities, it is cheaper to pay the typical mortgage each month than to rent in New Orleans, Pittsburgh, Chicago, Cleveland and Memphis.
New Orleans is the city with the most savings, with typical monthly mortgage payments costing $107 less than typical rent. In Pittsburgh, it would cost you $100 less per month to buy a home.
The top 18 cities to buy all have a price-rent ratio of 15 or less, a good indication that it is better for tenants to buy a home than stay on rent for the long term.
Additionally, Pittsburgh, while tied with other cities like New Orleans, Chicago and Cleveland with the lowest price-to-rent ratio of 12, is the best city for buyers because it has the lowest home prices ($188,419). Are. , according to the study.