Homeownership Beats Renting in These Cities
Although many market studies over the past several months have found homeownership to be prohibitively expensive across the country, a new report from Zillow Home Loans suggests the monthly cost of homeownership may be more attainable than people think.
According to the report, monthly mortgage payments are less expensive than rent in nearly half of the 50 largest US metro areas. These findings contradict a Realtor.com Rental Report last month that found renting was more financially advantageous than buying in all major US cities.
Affordability is benefiting from recent dips in mortgage rates, which have now reached their lowest level since early 2023, said Zillow Home Loans. With 25% of sellers cutting prices on their properties and inventory up 22% compared with a year ago, homebuyers are gaining bargaining power. At the same time, rents are 34% more than they were before the pandemic, according to Zillow Home Loans.
Of the 22 markets where mortgage payments are less than rent, New Orleans, Chicago and Pittsburgh offer the greatest savings before taxes and insurance. This assumes a buyer can put 20% down on a home.
The typical rent payment in Chicago is $2,074 per month, compared with a typical mortgage payment of $1,640. Homeowners in New Orleans can save $450 per month by paying on a mortgage rather than renting, and Pittsburgh homeowners can save about $320 per month, the report estimates. Nationwide, a typical monthly rent payment is $2,063 compared with the typical mortgage payment of $1,827, according to the report.
"This analysis shows homeownership may be more within reach than most renters think," said Zillow Home Loans senior economist Orphe Divounguy. "Coming up with the down payment is still a huge barrier, but for those who can make it work, homeownership may come with lower monthly costs and the ability to build long-term wealth in the form of home equity — something you lose out on as a renter."
The report notes there are other expenses to consider in both scenarios. Homeowners pay taxes, insurance and utilities as well as ongoing maintenance, while renters typically need to purchase insurance and often pay extra for parking, pets and utilities, said Zillow Home Loans.
The top 10 markets where typical mortgage payments offer savings over typical rent include:
- New Orleans with monthly savings of $446
- Chicago with monthly savings of $434
- Pittsburgh with monthly savings of $321
- Miami with monthly savings of $314
- Memphis with monthly savings of $290
- Cleveland with monthly savings of $265
- Detroit with monthly savings of $213
- Tampa with monthly savings of $191
- Oklahoma City with monthly savings of $188
- Houston with monthly savings of $182
- Birmingham with monthly savings of $153
Source: GlobeSt/ALM