Home ownership is a big financial goal for most families and individuals in America. In fact, it is a quintessential aspect of the American Dream. It’s an opportunity to set down roots, invest in your future and your family’s, and build equity. On the other hand, it’s commonly believed that renting a home is merely money that you’ll never get back, and most people believe that, if you have the financial freedom to do so, it’s best to start investing in property as soon as possible.
However, there are certain locations in the United States where renting may be the most fiscally beneficial option for a significant amount of time. RewardExpert – a free service that helps people make their finances more rewarding – released a report that determines where, exactly, that phenomenon occurs.
RewardExpert Determines Where It’s Better Renting a Home than Own a Home in the U.S.
Analyzes average rents and home prices to find the relative costs of buying and renting in 281 metropolitan areas in the U.S. in order to determine where it’s better to rent than own, and vice versa.
New York, N.Y. – When renting a home, an individual or a family will never get that money back, while owning a home is an opportunity to build equity. However, in certain cities in the United States, renting may be the more affordable solution in the long term. RewardExpert—a free service that helps users take full advantage of credit card and travel rewards—today released a report ranking Ten Places Where it is Better to Rent than Buy a Home, and Vice Versa based on an analysis of 281 metropolitan areas in the United States.
“In this report we are concerned rather less with the specific circumstances under which it makes more sense to rent or own—such as whether one expects to move in a few years’ time—but where it makes the most sense to rent, and where it makes the most sense to buy,” says RewardExpert co-founder Vlad Tyschuk. “This regional variation reflects uneven property values and home prices, and the disparities that appear between home sale prices and the rents a given market will support.”
Here are the top three places in the country where it makes more sense to rent:
- San Francisco Bay Area/Silicon Valley, California – Number one place in which it is most advantageous to rent is the region comprising Silicon Valley and the part of the San Francisco Bay Area included in the San Francisco-Redwood City-South San Francisco and San Rafael metropolitan areas. While monthly rents in the region are obscenely high, running $3,608 per month on average, this has not kept pace with the even more gratuitously obscene prices of homes in the area, which average $1,295,000 as of May 2018. Over the life of a 30-year mortgage loan, this amounts to a total cost of $2,146,000.
- San Luis Obispo-Paso Robles-Arroyo Grande, California – While average home prices in the San Luis Obispo metropolitan area are little more than half of those in the Bay Area, at $690,000, rents are still quite high ($2,130 per month), but not nearly high enough to make buying a home here make much more sense. It will still take 44.71 years of monthly rent payments at this rate to equal the total cost of buying a home, which (again, including only principal and interest payments, plus the down payment) come out to a total of $1,143,000 over the life of the mortgage loan.
- Bellingham, Washington – Third is Bellingham, Washington, the northernmost city in the U.S. with a population greater than 100,000. Like many other places on our list, both home prices and monthly rents are quite high due to strong employment, high wages, and a tight housing supply in the area. In Bellingham, the relative advantage of renting over owning has only increased in recent years, as home prices have continued to increase ($415,000 in May of 2018 versus $382,000 in the first quarter of 2017), while rents have dipped from $1,526 in February of 2017 to $1,295 per month in May of 2018. At these prices, it will take 44.22 years of rent payments to equal the total cost of purchasing a home.
The Top Ten Places to Rent
The Top Ten Places to Own
“For the most part it is a wiser investment to own your property,” says RewardExpert co-founder Vlad Tyschuk, “in fact, it still costs less to own than rent in more than half of the metropolitan areas studied. The difference is, however, significant only in a small fraction of these. In only five metropolitan areas does aggregate rent outstrip the cost of home ownership in less than twenty years.”
To determine the ranking, the report analyzes average home sale price and monthly rent data for 281 metropolitan areas in the United States to find in which areas it is most advantageous to rent and in which it is most advantageous to buy a home at the local average price, with a 30-year fixed-rate mortgage and a 20 percent down payment.
For further information and to view the full report, visit the RewardExpert website.
RewardExpert helps users navigate the world of frequent flyer programs and credit card rewards. The free web service provides smart tools and features that enable users to make more rewarding decisions. Through personal finance and travel insights, users are empowered to turn their spending into earning. Find out how to quickly gain rewards while spending less to see more of the world. To get started, visit www.rewardexpert.com.