The Cleveland metro ranked number one for buying versus renting
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Buying versus renting is more affordable in some cities according to realtor.com. A new analysis finds that low mortgage rates have made it more affordable to buy than rent in a growing number of metros. Realtor.com recently analyzed the numbers. As low mortgage rates continue into 2021 “buying a home was equal to or more affordable than renting in 15 of the 50 largest metros in the U.S,” the report states. Nine other markets were within 5% of flipping in favor of buying.”
Even though rates have increased a bit they remain historically low. Expect those rates to boost affordability as the year continues. “It’s not surprising that buying makes more sense where real estate is affordable and the median sales price is lower than the national median price,” said Chief Economist of realtor.com Danielle Hale.
The monthly cost to purchase a median-priced home in the 50 largest metros was $1,988, compared to the median monthly rent of $1,727. Cities, where it is cheaper to buy, include Cleveland, Chicago, Pittsburgh, Riverside, Calif., and Miami. Conversely, San Jose, Austin, Sacramento, Seattle, and San Francisco top the list of cities where it’s better to rent.
Listen to Sarah Pierce, Head of Operations, digital homeownership company Better.com, which is currently funding $4 billion in home loans a month. “While the 30-year fixed mortgage rate climbed to 3.26% last week, the highest since last July, it’s expected that homeowners will seize the opportunity to save while they can. Deciding between renting versus buying a house is never easy, but today’s low-interest-rate environment has made homeownership more attainable than ever.”
Pierce makes a point some buyers should consider. “Buying is a smart choice for many people, but it’s contingent on individual financial situations, location, and how long the homeowner plans to stay. A homebuyer usually needs to stay in the home for at least three years to make up the costs.”
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The low-interest rates enjoyed over the last six months have impacted the monthly cost to purchase a median price home. That monthly cost increased only 0.2 % year-over-year to $1,988. Compare that to rent prices which according to realtor.com increased 2.4% to $1,727. Consider that does not take into account the ongoing benefits of homeownership.
The methodology realtor.com applied: “ Purchase and rent costs reflect current costs and do not take into account holding period, price and rent appreciation, and inflation. Purchase costs are based on purchasing with a 30-year fixed-rate, fully amortizing mortgage of 80% (20% down payment), and do include taxes and insurance and are calculated based on realtor.com® metro-level residential listing price data and mortgage rate data for January 2021.” All rental units, realtor.com looked at were “two- to four -bedrooms in size so as to be somewhat comparable to the typical home purchase.”
Let’s take a deeper dive to see where buying is cheaper than renting right now. The Cleveland-Elyria metro ranks number one with buying a home with a median listing price of $198,000 cheaper than renting. Realtor.com has a monthly mortgage payment there of $967 compared to a rent of $1,195.
Despite the hot Miami housing market it looks cheaper to buy in the Miami-Fort Lauderdale-West Palm Beach metro with a median listing price of $400,000 and a monthly mortgage of $2,092. Renting there is pricey at $2,350 a month. The influx of snowbirds who rent during the winter months may impact those South Florida rental prices.
“With buying at today’s rates you can lock in your monthly housing payment which stays the same month to month. If you rent you face yearly rent increases,” Hale observes.
Once again buying versus renting comes down to both a financial and lifestyle choice.