Traditionally, buying a home has been considered a better option than renting. This is particularly true for those who plan to live in the home for at least seven years, as this is typically the amount of time it takes to overcome the initial transaction costs of purchasing a home, such as the title insurance, broker’s commission, legal fees and other closing costs.
Overall, some experts estimate that purchasing a home is 38% cheaper than renting a home for seven years. Still, in some major cities, the difference between buying and renting is not as great, while other cities offer a significant savings to those who buy. Here is a look at five major cities throughout the country and how buying a home compares to renting a home.
Despite the problem of affordable housing in LA for some years now, and the fact that home prices in Los Angeles have risen by 20% in the past year, it is still 24% cheaper to purchase a home than it is to rent. While the median home price in the city is $420,000, the median rent is $2,100 per month.
Much of this difference can be attributed to low mortgage rates. As such, rates would need to increase to 7% or more for renting to be cheaper than buying.
With a median home price of just $170,000, purchasing a home in The Windy City is 47% cheaper than renting one. In fact, rental prices here are a staggering $1,700 per month. After experiencing a slump during the second half of 2013, the Chicago housing market is still at about $10,000 below the national median. Rental prices, on the other hand, have increased by 7% over the past year.
These facts combined have turned Chicago into a true buyers market.
Miami is another buyer’s market, with buying saving 38% over renting. While the median home price for a home in Miami is $300,000, the median rent is an eye-popping $2,250. Of course, many of the homes that are sold in Miami are sold as either vacation homes or investments. As such, the market tends to be a bit more volatile in the area. Nonetheless, Miami real estate experts, predict that home prices will appreciate at about 2.3% per year in Miami, making buying a better choice than renting.
With a median home price of $175,000 and a media rental cost of $1,600, Philadelphia offers a 46% savings to those who buy versus those who rent. The city also offers a safe investment opportunity, as the housing market has been quite stable over the years.
Thanks to the oil industry and other energy industries, the Dallas economy has remained relatively strong. Dallas-area housing market soared last year. Couple this with the amount of land available and prices in the area have remained relatively stable, with a median home price of $190,000.
Median rental prices, however, are hovering around a median price of $1,650, making buying 41% cheaper than renting.