The age-old adage that it’s cheaper to buy a home rather than rent one is proving to be less and less true as the years go by.
Renting a home remains significantly cheaper than buying in all of California’s largest metro areas, according to a new study released Wednesday.
The study, conducted by financial analysis website Bankrate, found monthly mortgage payments far outpacing rent in the state’s high-cost housing markets, keeping in line with a national trend.
The study compared the average monthly rent to average monthly mortgage payments across the 50 largest U.S. metropolitan areas.
The biggest discrepancy in the U.S. was in San Francisco, where the typical mortgage payment is more than 190% higher than the average price of rent. San Jose ranked second nationwide with a 186% difference.
Seattle, Denver and Salt Lake rounded out the top five.
In the greater Los Angeles area, the gap was 88.5%, while in the San Diego Metro area it was nearly 80%. Los Angeles and San Diego were 6th and 9th nationwide, respectively. Other expensive markets like Portland and Austin also made the list.
“Big city dwellers are better off renting than buying a home, particularly in pricey coastal metros,” said Bankrate analyst Alex Gailey. “Even as home inventory improves, high mortgage rates, property taxes, and insurance premiums continue to price out many would-be buyers.”
The top five metro areas with the largest differences between renting and buying were all in the West, led by:
- San Francisco/Oakland/Berkeley: $3,055 rent vs. $8,882 mortgage (190.7% difference)
- San Jose/Santa Clara: $3,305 rent vs. $9,438 mortgage (185.6%)
- Seattle: $2,265 rent vs. $4,971 mortgage (119.5%)
- Denver: $1,927 rent vs. $3,787 mortgage (96.5%)
- Salt Lake City: $1,680 rent vs. $3,197 mortgage (90.4%)
Nationwide, the average mortgage payment for a median-priced home climbed to $2,768 per month, up from $2,703 last year. In contrast, the national average rent held steady at about $2,000, making renting 38% cheaper on average.
While renting remains more affordable than buying across all of the 50 largest U.S. metro areas, the cost gap is much smaller in several Midwest and Southern cities where home prices and living costs are generally lower.
According to Bankrate, the five metro areas with the smallest difference between average monthly rent and mortgage payments are:
- Detroit: $1,481 rent vs. $1,515 mortgage (2.3% difference)
- Pittsburgh: $1,452 rent vs. $1,601 mortgage (10.3%)
- Philadelphia Metro Area: $1,901 rent vs. $2,121 mortgage (11.5%)
- Cleveland: $1,419 rent vs. $1,607 mortgage (13.2%)
- Tampa/St. Petersburg, Florida: $2,140 rent vs. $2,587 mortgage (20.9%)
The study’s methodology included data from Redfin, Zillow and Bankrate’s own mortgage and insurance rate surveys, officials said. It assumed a 20% down payment, no HOA fees or PMI, and included average property taxes and insurance rates by metro.
Full results and methodology are available at: https://www.bankrate.com/real-estate/rent-vs-buy-affordability-study.
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