It’s common thinking in the real estate lexicon that it’s always better to own than rent. Renting, they say, is throwing money away. You’re paying someone else to rent each month ad infinitum instead of paying off a mortgage towards a goal of owning outright. The idea is that the rent you pay is lost money. But paying down a mortgage is an investment.
In theory, renting vs. buying thinking has validity. But that all depends on one important factor. How much are you paying in monthly mortgage payments compared to the average rent in the same city or area? If your mortgage payments are significantly higher than prevailing rents, are you still making the right investment at the moment?
The costs of renting vs. buying
Owning a home comes with a slew of hidden costs. In an apartment, the monthly payout usually ends at rent and utilities. Sometimes. Many leases include some of or all basic utilities. Aside from optional costs like parking or a gym fee, that’s usually the extent of renters’ liability.
For homeowners, however, monthly costs can quickly add up. Necessary payments like property taxes, waste removal and homeowners’ association fees, on top of mortgage payments, run a pretty penny. All those utilities are your responsibility, as well. And if something breaks, leaks, busts or stops working, it’s no longer just a call to the landlord. Costs are money out of your own pocket.
And that’s not to mention the nearly-always significant down payments to purchase a home. In the U.S., the average down payment is between $10,000 and $15,000 before you even move in. Just imagine what else could be done or invested in with that money instead of laying it out.
When and where it’s cheaper to rent
The truth is, it’s not always better to own vs. renting. This is particularly true when and where housing prices are skyrocketing. While this isn’t the case everywhere in the nation, there are numerous pockets where renting is the better value. So, where in America is it more fiscally responsible to rent than own?
We analyzed cities across the nation and compared average rent prices to mortgages in the same cities. These are specifically one- and two-bedroom leases vs. 30-year fixed mortgages with a 3.1 percent interest rate and 20 percent down. We crunched the renting vs. buying numbers and below are some of the most renter-friendly regions in the U.S. we found.
California is the place you oughta be
Living in most places in California is expensive. It carries one of the top three highest costs of living in the nation. But there’s nowhere more expensive when it comes to literal living. It’s the No. 1 most expensive state in which to rent and the most expensive to buy a home. That doesn’t preclude, however, that several spots are still a better value for renting vs. buying.
There are a number of cities in California friendly to renters. This is particularly true in the Bay Area and Northern California. At the top of the list, for example, is the San Jose–Sunnyvale–Santa Clara region. The average mortgage is nearly $4,800, with a median sale price of $1.4 million. However, an average one-bedroom lease is just under $3,000 and $3,700 for two bedrooms. That makes rents a whopping $1,881 and $1,159 cheaper each month, respectively.
Several other Northern California cities have large renter-friendly gaps. In Merced, rents are $345 cheaper than mortgages. Same in Santa Rosa, a $280 difference. And in the Stockton–Lodi region, rents are $257 less than an average mortgage.
There are other interesting pockets elsewhere in the Golden State. In the land between San Francisco and Los Angeles are Santa Maria–Santa Barbara and Salinas. In these two coastal regions, mortgages outpace rents by $807 and $578, respectively.
Southern charm for renters
A couple of thousand miles away from Hollywood, the Southern U.S. is also a strong savings region for renters. This is the case in the Deep South especially. Take the former state capital city of Milledgeville, GA, in Central Georgia.
Despite being a small town with a metro area of just 55,000, an average mortgage costs $976 a month, with an over $250,000 median sales price. But rents for both one- and two-bedrooms are substantially lower, considering the population size. A one-bedroom leases for $575 a month on average and a two-bedroom for $664. That’s a significant difference of $401 and $312 each month.
There are many other examples throughout the South, as well. The cities of Decatur, AL and the Virginia/Tennessee border tri-cities of Kingsport, Bristol, TN and Bristol, VA, for example, all feature rents over $100 a month less than average mortgages. Two-bedroom units in Tri-Cities and Statesboro, GA, also offer triple-digit differences.
Comfortable mountain affordability
Many cities in the Mountain West feature rates that are friendlier to renters over homeowners. And one of the most affordable of these states is Utah. The regions of Provo/Orem and Ogden/Clearfield, as well as Salt Lake City, all maintain average one-bedroom rents around $200 below average mortgages.
Two desirable Colorado cities also fall onto the renters’ advantage side of the ledger. The college town of Boulder and the go-west city of Greeley are renter-friendly by $50 and $44, respectively. But one of the most striking chasms is in Coeur d’Alene, ID. The Idaho Panhandle city has half-million median sale price homes with mortgages averaging about $1,800. One-bedroom rents were on average $400 lower, just under $1,400.
Owning a home isn’t always the best value
By no means are these all the cities and regions where renters can find a value more beneficial than homeownership. There are swaths of rents lower than mortgages across Texas and the Midwest, as well as the Great Lakes and Great Plains regions.
But where you don’t see this renting vs. buying trend take hold, of course, are places like Florida, metro Los Angeles, Chicago, greater New York and the remainder of the Northeast Corridor. These are, no surprise, the kind of places where rents are higher than mortgages.
Regardless of where you’re moving to or moving around, it’s always a good idea to compare. There’s a chance that where you wish to live is more affordable in an apartment than buying a home. Be sure to check out all the great apartment values on Rent. to see if renting is right for you.
