Want to get stop renting and become a first time home buyer? Making the leap is never easy, but housing data suggest the math may be shifting in your favor.
That's largely because falling interest rates have pushed down mortgage rates, making the month-to-month costs of owning a home cheaper than monthly rents in many parts of the country, especially in rural areas where home prices are not as high.
In 53% of U.S. counties, you’ll pay less per month to own a three-bedroom home than rent one — and that’s even with the additional homeowner costs of property tax, insurance, and interest payments factored in, according to an analysis by ATTOM Data Solutions, a national property database company.
That’s a big change from the start of 2019, when owning was the cheaper option in just 41% of housing markets.
ATTOM found owning was most cost effective in rural counties, such as those with populations of less than 500,000. But owning was cheaper some larger counties too, like Miami-Dade and Broward in Florida and Philadelphia.
“The main driver for that is how low mortgage rates are currently. We’ve seen rates come down well over a point in the last 15 months,” says Todd Teta, chief product officer with ATTOM Data Solutions. As of Feb. 6, the average interest rate for a 30-year fixed-rate mortgage was 3.45%, according to Freddie Mac, but it was 4.41% a year earlier.
Such favorable financing is good news for those wanting to purchase a property, but, of course, securing affordable interest loan repayment rates is only part of the battle.
What It Takes to Own
While renters may be required to pay a security deposit equal to a month or two of rent upfront, home buyers need to have a down payment, a sum than can reach into the thousands of dollars.
Despite this costly initial expense, home buying still wins out as the better choice than renting in a majority of housing markets, assuming homeowners make a 3% down payment, according to ATTOM Data Solutions.
On a $270,000 home, the median sales price for single-family homes and condos at the end of 2019, you’d only need $8,100. That may be more achievable than you think. If the average worker set aside 10% of their salary for about a year and a half, they could have that 3% down payment, according to research conducted by Money.
The other benefit home buying has over renting? All those monthly lodging expenses actually go towards owning an asset you can then sell, hopefully for a profit.
And a study by the Urban Institute found that the returns for homeownership, not including any tax deductions or benefits, are higher than the after-tax returns on many stock- and bond-market investments.
Where Homebuyers Have It Better
Those looking to buy do better in smaller cities and more rural places, while renting remains more affordable in popular suburban and urban areas, according to ATTOM’s analysis of fair market rent data from the U.S. Department of Housing and Urban Development and public records sales deed data from 855 U.S. counties.
Owning is cheaper in 57% of counties with less than 500,000 residents, but once the population surpasses that benchmark buying is only the better option in 31% of areas.
In places with more than 1 million residents, home buying affordability drops even further, with only 16% of such counties beating renting costs. If you’re after a home with a city atmosphere, try places like Miami, Detroit, Philadelphia, Tampa, Cleveland and Pittsburgh, where renting costs more than owning a home.
Overall, homeownership tended to be cheaper in counties throughout the Midwest and Southeast, while renting was better in the Northeast, Texas, and on the West Coast.
Below are the five most populated counties in the country where it is cheaper to buy a home than rent:
Miami-Dade County, Fla
Average monthly cost of 3-bedroom rental: $2,327
Percent of average wages needed to rent: 51%
Average home sales price in 2019: $349,250
Percent of average wages needed to buy (assuming 3% down payment): 50.9%
Broward County, Fla.
Average monthly cost of 3-bedroom rental: $2,362
Percent of average wages needed to rent: 53.8%
Average home sales price in 2019: $330,000
Percent of average wages needed to buy: 50.9%
Wayne County, Mich.
Average monthly cost of 3-bedroom rental: $1,361
Percent of average wages needed to rent: 27.5%
Average home sales price in 2019: $110,000
Percent of average wages needed to buy: 16.6%
Philadelphia County, Penn.
Average monthly cost of 3-bedroom rental: $1,646
Percent of average wages needed to rent: 30.4%
Average home sales price in 2019: $225,000
Percent of average wages needed to buy: 27.7%
Hillsborough County, Fla.
Average monthly cost of 3-bedroom rental: $1,687
Percent of average wages needed to rent: 37.4%
Average home sales price in 2019: $239,950
Percent of average wages needed to buy: 35.6%