The housing affordability crisis has made it much harder for American families to transition from renting to buying a home.
In fact, at today’s home prices and mortgage rates, owning a home vs. renting can add up to $10,000 in monthly expenses in some metro areas. How so?
The majority of rent-vs-buy analyses factor in mortgage costs only. But as many homeowners know, the mortgage is only part of homeownership costs.
To dispel the confusion, Creditnews Research has compared average rent prices against the true cost of owning a typical home across America’s 100 most populous metros.
The study provides a much more comprehensive rent-vs-buy comparison, taking into account all homeownership costs, including insurance, taxes, HOA fees, and renovation expenses.
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All costs included, owning a home is more expensive than renting in all of America's 100 most populous metro areas;
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The monthly cost difference between homeownership and renting varies greatly across the country. It can be as high as $11,303 in San Jose, CA and as low as $567 in Jackson, MS;
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The metros with the highest homeownership costs relative to renting are mainly located on the West Coast, in Hawaii, and parts of the Northeast;
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Meanwhile, the metros with the smallest difference between homeownership costs and renting are in the South and Rust Belt;
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Excluding other housing expenses, mortgage payments are lower than the average rent in 22 of the metros. That’s another reminder for homebuyers to consider all housing costs before pulling the trigger.
Where it makes the most sense to buy
The most homebuyer-friendly metros have the smallest difference between total housing costs and rent—thanks to much lower home prices.
While the cost of homeownership is still higher than renting across each of these metros, the difference is less than $900. That’s a decent tradeoff for homeowners, who are accumulating equity by owning a home instead of renting.
Below are the top 10 metros with the smallest difference between renting and total homeownership costs:
Jackson, MS: Jackson has the smallest difference between total housing costs and average rent. Residents pay just $567 more each month to own a home—thanks to an affordable typical home price of under $200,000.
El Paso, TX: El Paso is the second most homebuyer-friendly metro. Residents pay an extra $646 per month in homeownership costs, largely due to lower home prices and relatively higher rent expenses.
Toledo, OH: The first Midwestern metro in the top 10, Toledo offers good value for homebuyers. The average home price is $189,228, resulting in manageable mortgage payments of $1,070. The difference between owning and renting is $710 per month, with renters paying $1,220 on average.
New Orleans-Metairie, LA: The total monthly cost of homeownership in New Orleans, LA, is $2,395, compared to $1,678 for rent. That means residents pay only $717 more to own their homes.
Pittsburgh, PA: Pittsburgh is affordable for both homeowners and renters. The average home price is $217,285, translating to total homeownership costs of $2,178. That’s just $718 higher than rent.
McAllen-Edinburg-Mission, TX: The second Texas metro in the top 10, McAllen has an affordable housing market. It’'s one of three metros where total monthly housing costs are under $2,000. The difference between homeownership and rent is $727 per month.
Syracuse, NY: In stark contrast to New York City, the upstate metro of Syracuse, NY, is one of the most affordable for homeowners. In Syracuse, the typical cost of homeownership is $2,295 per month, which is $740 higher than typical rent.
Scranton-Wilkes-Barre, PA: Scranton has affordable rents at $1,276 per month, and homeownership isn’t much more expensive. Total costs are $2,056 per month, just $780 higher than rent.
Cleveland-Elyria, OH: The second Ohio metro in the top 10, Cleveland has lower housing costs and smaller mortgage payments than most of the country. Residents pay $874 more each month to own a home instead of renting.
Augusta-Richmond County, GA-SC: Rounding out the top 10 is Augusta, where average monthly homeownership expenses are $2,331. By comparison, typical rents in this metro go for $1,436, for a difference of $895 per month between homeownership and renting.
Where it makes the most sense to rent
The least homebuyer-friendly metros have the biggest difference between rent and homeownership costs.
In fact, mortgage payments alone in these metros are 62% to 164% higher than average rent prices. With all costs included, the difference can balloon up to a staggering $11,303.
Below are the top 10 metros with the highest difference between renting and total homeownership costs:
The metro with the largest difference between average rent and total housing costs is San Jose, CA. San Jose residents pay a staggering $11,303 more each month to own their homes.
Although average rent in San Jose is very expensive ($3,360 per month), it’s still much more affordable than owning a home.
Other California metros that made the list are San Francisco, Los Angeles, San Diego, and Oxnard. In these areas, homeownership costs are $4,961 to $7,615 more expensive than renting.
Outside California, Urban Honolulu, HI; Seattle, WA; Denver, CO; Salt Lake City, UT; and Boston, MA-NH are also among the 10 least homebuyer-friendly metros.
For perspective: mortgage costs vs. rent
Although there are many costs associated with homeownership, mortgage payments are undoubtedly the biggest monthly expense.
By our estimates, mortgage payments alone exceed average rents in 78 of the top 100 metros—led by the California metros of San Jose, San Francisco, Los Angeles, and San Diego, as well as Urban Honolulu, HI.
In each of these metros, mortgage payments exceed average rent by at least $1,000 a month.
On the flip side, there are 22 metros where mortgage payments are below average rent payments, including New Orleans, LA; Jackson, MS; El Paso, TX; Chicago, IL-IN-WI; Syracuse, NY; and Pittsburgh, PA.
Below is the list of the top 10 metros where homeowners have the biggest savings compared to renting:
Methodology
Average Rent Prices
For average rent expenses, the Zillow Observed Rent Index (ZORI) was used. The index reflects typical rent prices in the 35th to 65th percentile range in asking rents across each metropolitan area. The data is for June 2024 and is seasonally adjusted.
Total Homeownership Costs
For average home prices, the Zillow Home Value Index (ZHVI) was used. The index reflects typical home values in the 35th to 65th percentile range. The data is for June 2024 and is seasonally adjusted.
Mortgage Parameters:
- Term: 30-year, fixed-rate
- Mortgage rate: 7%
- Down payment: 15%
In addition to mortgage payments, the following cost components were added to homeowner expenses:
- Homeowners’ insurance: 0.5% of the property’s value, annually
- Property tax: 1.11% of the property’s value, annually
- Private mortgage insurance: 0.7% of the property’s value until home equity reaches 20% of the mortgage, annually
- HOA fees: $3,108 annually, which reflects the nationwide average
- Renovation: 1.5% of the property’s value, annually
- Zillow. Zillow Home Value Index (ZHVI). Data is for June 2024 (retrieved on July 31, 2024)
- Zillow Observed Rent Index (ZORI). Data is for June 2024 (retrieved on July 31, 2024)