TRABUCO CANYON, Calif.–In approximately half of the nation’s top 50 markets, it’s less expensive to purchase a home than it is to rent, according to new data.
It is cheaper to own in 24 markets and cheaper to rent in 26, according to research released by CJ Patrick Co., which used data from First American Data Tree.
The data examined at median rent prices, median home sale prices, and taxes and insurance. For the buy calculation, CJ Patrick Co. only considered homes in the lowest quarter of the price scale, which would typically be purchased by first-time buyers. It further assumed a 30-year fixed-rate mortgage at 5% interest with a 5% down payment.
Of the top 50 markets, 14 showed very little difference between the monthly costs of renting and owning a home. Cities in the Midwest and South favored buying, according to CJ Patrick Co.
As an example, the company pointed to Memphis, which had a monthly rental cost of $914, which was nearly twice as much as the $462 cost of owning a home (again, a home in the 25th percentile of price ranges).
Birmingham, Ala.; Pittsburgh; Jacksonville, Fla.; Oklahoma City; St. Louis; Tampa, Fla.; Atlanta; Miami, and New Orleans all showed monthly home payments that were significantly cheaper than the median monthly rent, CJ Patrick Co. reported.
Cheaper To Rent Than Own
Meanwhile, at the other end of the spectrum, cities in the West dominated the list of markets where it is cheaper to rent than own a home. That is because home prices in the West are some of the highest in the nation, CJ Patrick said.
California claimed the top four spots, with San Jose, Los Angeles, San Francisco and San Diego favoring renting over owning. Those cities were followed by Salt Lake City; Portland, Ore.; Providence, R.I.; Seattle; Sacramento, Calif.; and Denver (with New York City nearly the same as Denver).
"In the most expensive cities, it's hard to find anywhere to live," said Rick Sharga, CEO of CJ Patrick, in a statement. "This is especially true in California, where San Jose, Los Angeles and San Francisco have three of the lowest homeownership rates among the top 50 metros and also have three of the lowest apartment vacancy rates. That housing scarcity can't help but continue to drive prices up for both buyers and renters."
The National Average
CJ Patrick noted that, not surprisingly, in the areas where it is cheaper to own a home than rent, the homeownership rate is higher than the national average.
The company noted the national homeownership rate in the third quarter of 2019 was 64.8%, according to the U.S. Census. In the areas favoring buyers, it was 65.6%. Apartment vacancies in those areas were also higher than the national average. Los Angeles has a homeownership rate below 50%, while Nashville, Tennessee's rate is around 72%.