When it comes to owning versus renting, we understand there’s a lot to consider. For the past decade, people have been consistently renting rather than buying. No one wanted to be caught in a no-win situation after so many homeowners were left holding the bag when the financial crisis hit a few years ago. But there was never anything wrong with owning a piece of property, only the loan structure that was decided upon by banks.
Fortunately, the market has seen a recent change. The first quarter of this year showed that more people were buying over renting. Across the country, 854,000 new owners moved into their home and only 365,000 renters signed a lease agreement. These numbers are a good indicator of an improving economy and for the state of real estate. But which choice actually costs more, and does it depend on where you choose to settle?
The Cost Analysis
Zillow recently conducted an analysis that found owning was less expensive than renting overall. After crunching the numbers, they found renters could buy a home that was close to 50% more than the average median cost of a home in their area without spending any more of their budget on housing. The median home price in the USA is $196,500, but the average rent cost in the country is $1,416. The rental numbers simply don’t match up when it comes to what the home is actually worth. In other words, owners who pay a mortgage at $1,416 a month are paying for a house that’s worth closer to $300,000. And this doesn’t even include how much the home may appreciate in value over time.
A Long-Term Investment
There’s no question that home ownership will require more money upfront, which can scare new owners (especially young people) away from the market. Renting doesn’t saddle people with a life-long mortgage payment, but instead, allows for more freedom. Renters don’t need to pay for repairs, nor do they need to worry about upgrading the home. All the amenities they want typically already come with the lease agreement. However, renters may not realize that when they total everything up, they’re simply not getting a very good deal. Experts speculate that the drop in renters may indicate that more people are saving up for a down payment on a house, which is a good sign people are waking up to their long-term future.
How Does This Breakdown?
In most major cities, the average person is better off owning versus renting, though not in every city. For example, San Francisco’s average home price is well over a million dollars, meaning that renting would likely be a better option (at least for the short-term). The analysis completed does not attempt to predict what the home prices will look like in the future, only how people can make smarter decisions about where they live right now. Out of 15 cities, nine found that buying was smarter than renting. These cities included metropolises like Chicago, Austin, Dallas, and Columbus.
If you’re thinking about buying, then you should know that home sale is also at an all-time high. With 5.71 million homes available across the market, there’s a good chance that you’ll find the place you’re looking for.