4 Cities Where It’s Cheaper To Buy Than Rent Right Now
When we think about buying a home versus renting one, common logic dictates that buying will cost more than renting. On average, that is true -- according to Redfin, across the U.S., the average home costs 25% more to buy than to rent. However, in four metropolitan areas, the reverse is true -- most likely due to stagnating home prices.
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According to a Redfin analysis of U.S. single-family homes, condos/co-ops and townhouses in the 50 most populous U.S. metros, estimating a 6.5% mortgage interest rate, a 5% down payment and homeowner's insurance equal to 0.5% of the purchase price, here are the four cities where it's cheaper to buy than rent.
Also see 10 cities where renting is at least $1,000 cheaper than buying.
Houston, Texas
Mortgage: $2,343
Rent: $2,371
Difference: -1.2%
In Houston, where the difference between average monthly mortgage and rental payments is less than $30, 52% of the properties are cheaper to buy than rent.
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Cleveland, Ohio
Mortgage: $1,730
Rent: $1,800
Difference: -3.9%
In Cleveland, where the difference between average monthly mortgage and rental payments is $70, 57% of the properties are cheaper to buy than rent.
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Philadelphia, Pennsylvania
Mortgage: $1,869
Rent: $2,000
Difference: -6.6%
In Philadelphia, where the difference between average monthly mortgage and rental payments is $131, 59% of the properties are cheaper to buy than rent.
Detroit, Michigan
Mortgage: $1,296
Rent: $1,697
Difference: -23.6%
In Detroit, where the difference between average monthly mortgage and rental payments is $401, a significant 80% of properties are cheaper to buy than rent, which is the highest number of such properties in the entire U.S. Nationwide, just 19% of homes are cheaper to buy than rent.
While stagnating prices in these cities means homeowners may not be earning as much equity as their peers in other states, it also means that when housing prices go bust, they don't suffer the same losses.
Also, higher mortgage rates account for larger disparities between prices. If mortgage rates were to drop to even 5% from their current rate, it would close the gap between buying and renting prices, making buying a home only 10% more than renting, on average.
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This article originally appeared on GOBankingRates.com: 4 Cities Where It’s Cheaper To Buy Than Rent Right Now
