It’s Only Less Expensive To Own Rather Than Rent In These 4 Cities

Granted it’s largely anecdote, but you hear a lot these days about Americans moving abroad to realize the American dream of home ownership. Makes sense given the increasingly outrageous cost of buying real estate in the United States today. 

To be fair, places still exist where $100,000 can buy you one heck of a life. It’s just that these places tend to be outside of the nation’s major metropolitan areas. In the nation’s largest metros, $100,000 doesn’t get you very far. And, according to the latest data from Redfin, buying a home is a better deal than renting in just four of the country’s biggest cities. 

• In Detroit, the typical home costs 24% less to buy than rent. 
• In Philadelphia, it’s 7% less expensive to be a homeowner. 
• In Cleveland, it’s 4% less expensive. 
• In Houston, it’s a razor thin 1% cheaper. 

The Redfin analysis assumed a 6.5% interest rate with 5% down. It also factored insurance and property tax into the mix. The research did not account for maintenance, which could make those 1%, 4% and even 7% margins disappear. 

On the flip side, it’s 165% more expensive to buy than rent in San Jose, California. How nice of San Jose to take just a little bit of the heat off of national and international whipping boy San Francisco, where it costs 139% more to buy than rent. 

The ownership premium in some of the other biggest cities in the country looks like this: 

• Oakland (99%)
• Anaheim (91%)
• Seattle (88%)

In these five places there are literally no homes that are cheaper to own rather than rent. 

Literally insane. 

Looking down the list to some hot spots:

• It’s 30% more expensive to buy rather than rent in Austin. Only 5% of homes there cost less with a mortgage relative to rent. 
• In Las Vegas, the ownership premium is 35.2% with under 1% of homes cheaper to own than rent. (Remember when everyone was moving to Vegas for cheap housing!?).
• Things are a bit more reasonable in Tampa Bay, where the ownership premium is 13.5% and you’ll get a better deal owning rather than renting 21.7% of properties. 

Nationally, it’s 25% more expensive to own and just 19% of properties are cheaper to buy. 

Interest rates would have to drop to 5% to make a mortgage payment just 10% more expensive than rent. At a 4% mortgage interest rate, the premium declines to a much more sane 1%. 

Not to be a downer, but we’re guessing that as rates drop and more people come off of the sidelines to buy amid constrained supply, prices will start to go up again. 

The Bottom Line: Not gonna lie, here at The Juice we do like to hear ourselves talk. We like to think we say it well. 

However, we gotta give credit where credit’s due. 

Redfin’s Chief Economist, Taylor Marr, nails today’s bottom line without even knowing he nailed today’s bottom line: 

I wouldn’t encourage people to squeeze their budgets in order to buy a home when prices are falling and we’re teetering on a recession… In the years leading up to the pandemic, it made sense for some homebuyers to break the rule that says not to spend more than 30% of your income on monthly housing costs, but these times are more risky, so it makes sense to be a little more conservative.

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