Live In The Western US? It's Likely Cheaper To Rent

Most of the US metros where it is more expensive to own than rent are located throughout the Western United States, according to new research from the National Association of Realtors. 

Against the backdrop of a record-breaking year for home sales and home rentals—and with prices both metrics rising at a double-digit pace—continue to rise exponentially, it is more expensive to own a single-family existing home in 101 out of 178 metro areas (56%) surveyed by NAR. 

The most expensive cities for homeownership include San Jose, San Francisco, Urban Honolulu, Barnstable Town, San Diego-Carlsbad, Seattle-Tacoma-Bellevue, and Yakima. By way of illustration, in the San Jose area the expected monthly cost associated with owning a home is $11,291 compared to $2,709 to rent an apartment.

The metro areas where it is relatively less expensive to own than to rent are mostly in the Middle Atlantic, South Atlantic, and East South-Central divisions—with the notable exception of the New England metros. 

In areas with a population greater than 200,000, the top metros where it is relatively cheaper to own than rent compared to the national average are Erie, Pennsylvania; South Bend-Mishawaka, Indiana-Minnesota; Ocala, Florida; Florence, South Carolina; and Fayetteville, North Carolina. In these metro areas, the mortgage payment, estimated property tax, and maintenance/insurance is 20% to 30% higher than the asking rent, according to NAR. 

Among larger metro areas, it’s cheaper to own than to rent in Atlanta-Sandy Springs-Marietta, Georgia; Tampa-St. Petersburg-Clearwater, Florida; and New York-Newark-Jersey City metro areas, where the cost of owning is 40% to 50% more than the asking rent.

These findings dovetail a recent analysis by professors at Florida Atlantic University and Florida International University, which found that in Dallas, Denver, Houston, Kansas City and Seattle, consumers looking to build wealth are better off renting. In those cities, the monthly cost of homeownership is rising faster than monthly rents.

“In these five metros, home prices have shot up so fast, and the potential for near-term price declines is just too great,” Ken H. Johnson, a real estate economist and associate dean in FAU’s College of Business, said in prepared remarks. “There is strong evidence that home prices in these markets are significantly higher than their respective long-term pricing trends.”

And in Atlanta, Boston, Chicago, Cincinnati, Cleveland, Detroit, Honolulu, Los Angeles, Milwaukee, Minneapolis, New York, Philadelphia, San Diego, San Francisco and St. Louis, consumers are just as likely to create more wealth by renting and reinvesting as owning and building equity, the researchers said.