Despite escalating home prices, Americans in many cities still can find it more affordable to own a home with a mortgage than to rent nationwide, according to the Urban Institute.
The think tank’s research shows that a median-income family spends 28 percent of its household income to pay the median rent for a three-bedroom house. On the other hand, they’ll spend 25 percent of their income for a monthly mortgage payment (principal, interest, taxes, and insurance) on a median-price home with a 30-year fixed-rate mortgage and 3.5 percent down payment. If a household makes a 20 percent payment, they’ll see a reduction in their monthly mortgage to 22 percent of their income.
Still, affordability varies quite a bit across the country. In a new study of 33 metros, Urban Institute researchers found Miami families will save the most by buying over renting. The metro had the nation’s largest negative rent gap. A median-income family in the area would save nearly 11 percent of their income by purchasing a median-priced home with a 3.5 percent down payment instead of renting. In Detroit, homeowners could save 7.1 percent of their income by buying.
The following are the 17 cities where it’s cheaper to buy a home rather than rent:
- Miami-Fort Lauderdale, Fla.: -10.9%
- Detroit: -7.1%
- Chicago: -5.6%
- Philadelphia: -5.0%
- Tampa-St. Petersburg, Fla.: -4.6%
- Pittsburgh: -4.5%
- Cleveland: -3.5%
- Cincinnati: -3.4%
- Orlando, Fla.: -3.2%
- Houston: -2.5%
- San Antonio, Texas: -2.3%
- New York: -1.8%
- Minneapolis-St. Paul, Minn.: -1.5%
- Kansas City, Mo.: -1.4%
- Columbus, Ohio: -1.1%
- Boston: -0.6%
- Atlanta: -0.1%
Source: “16 Cities Where It’s More Affordable to Rent Than to Own,” USA Today (Dec. 18, 2017)
