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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:
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.
This article, " It's Cheaper to Buy Than Rent a Home—Depending Where You Live " was originally published on ValuePenguin .
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
