Proprietary Data Insights
Top Residential REIT Searches This Month
9 Cities Where It’s Cheaper To Rent An Apartment Than Buy A Home
Well, it’s official.
The interest rate on a 30-year mortgage hit a not-so-nice, but certainly round 8.0% on Wednesday. Incredible. We won’t even run the math on how much more expensive this makes monthly payments. Just refer to yesterday’s Juice and you’ll have a good idea. Of course, this number will fluctuate as it has for months at just below what is really the psycho-symbolic (we just made that up!) threshold of 8.0%.
Just like $19.99 might make you more likely to buy something than $20.00, 8.0% might make you less likely to take on a mortgage than 7.9%.
No doubt, we picked a good theme for October. Because Housing absolutely is Haunted. You can see a list of everything we have done this month — all related to real estate, but spanning personal finance, investing, the economy and this housing crisis — by looking at yesterday’s aforementioned Juice.
Taken together, everything you hear on housing might make you think it’s a bad time to buy. And there’s a case to be made for this viewpoint. We explore it in a minute as we look at just how much less expensive it is to rent than buy throughout much of the United States.
However, there is another school of thought.
Speaking of psychology. All of these people sitting on the sidelines of the housing market, flush with cash, but not wanting to take the plunge. Once a handful of them see the number ‘6’ fronting the interest rate on a 30-year mortgage they’re going to rush into the housing market. Once we see ‘5’ forget about it.
You heard it here at The Juice first — once interest rates finally start to come down, and once they get into the 5%-to-sub-7% range, this housing market will explode to the upside. Prices are going to go insane, offsetting — maybe more than offsetting — any decrease in rates.
So, that’s your case to buy. Which sounds weird to say out loud, but actually might make some sense, if we’re correct. And, if you’re not sitting in a favorable housing situation as we speak.
Anyhow, to the data, courtesy of Redfin:
The chart explains itself, doesn’t it? Things suck out there if you’re looking to rent a new apartment or buy a home, particularly as a first-time buyer.
When smaller, once seemingly affordable cities such as Columbus, OH, start popping up alongside San Francisco, you know we have a problem. As of August 2023, it’s $1,236 a month more expensive to buy than rent in the city of Columbus. Nationally, it’s not much better, at an average of $1,110.
But it’s not just in the US. You know we like to keep you updated on the equally crazy Canadian housing market.
We already know rent is high north of the border. The average asking price across Canada in September was $2,149, up by more than 11% from last year. In Toronto, the average one bedroom goes for $2,614. Not quite Manhattan prices, but definitely in line with, say, Los Angeles.
Anyhow, if you want a shared accommodation — translation: a roommate — the average cost for a room in Canada is now $944 a month, up 18% year over year. In Toronto, it’s more than $1,300 a month. And listings for shared accommodations from coast to coast to coast in Canada have skyrocketed 27%. In Ontario (the province that includes Toronto), they’ve jumped an astonishing 78%.
The Bottom Line: Actually, we always have words.
So here’s our nickel’s worth of free “advice” for the day.
The rent versus buy debate always generates hot sports opinions. But, ultimately, it comes down to your situation. Use common sense. If you’re barely making ends meet from work, but have a few bucks in the bank, is it a wise financial decision to spend a grand or three more on home ownership each month compared to renting? Probably not.
However, if you’ve been waiting and waiting and just can’t wait anymore. If you’re worried the housing crisis will only get worse once rates come down. If you make good money and are regularly socking thousands away each month. Well, it might be time to pounce, particularly if you’re coming from a situation with lots of equity.
Bottom line to the bottom line — you can poke holes in any of these hypotheticals. Because this dilemma is one of the most personal areas of personal finance. We’re just here to present the data and add in our two cents along the way.
News & Insights
Want to get content like this directly to your inbox? Then we urge you to sign up for our newsletter here