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Ten Places Where it is Better to Rent than Buy a Home, and Vice Versa
Conventional wisdom dictates that it is always better to own your home than to rent it. It’s commonly said that rent is merely money spent, while a mortgage payment builds equity, however slowly, and is almost always the better of the two options. It has recently come to light that this truism is now less true than ever, at least under certain circumstances and in certain places around the country.
In this report, we are concerned rather less with the specific circumstances under which it makes more sense to rent or own (e.g. when one expects to move in five years or less, etc), but where it makes the most sense to rent, and where it makes the most sense to buy. This regional variation reflects uneven property values and home prices, and the disparities that appear between home sale prices and the rents a given market will support.
RewardExpert analyzed average home sale price and monthly rent data from Trulia at the level of the Census Bureau defined Metropolitan Statistical Areas for 281 metropolitan areas in the United States. Using this data, we determined in which areas it is most advantageous to rent and in which it is most advantageous to buy a home at the local average price, with a 30-year fixed-rate mortgage and a 20 percent down payment.
- It still costs less to own than rent in more than half of the metropolitan areas studied. The difference is, however, only significant in a small fraction of these. In only five metropolitan areas does aggregate rent outstrip the cost of home ownership in less than twenty years.
- At the other end of the spectrum, there are thirteen metropolitan areas (three of which have been combined in our ranking as the San Francisco Bay Area / Silicon Valley region of California) in which the total cost of buying a home of average value with a 30-year mortgage is equivalent to 40 to 50 years of rent payments.
- Generally speaking, it makes the most sense to buy in Florida, Texas, and Rust Belt cities, and it makes the most sense to rent in California, cities in the Mountain West, and affluent Northeastern metropolitan areas.
It is always and everywhere true that home ownership is superior to renting in at least one way: a mortgage payment builds equity and is an investment, while rent is simply money spent. Purchasing a home is, however, not a decision to be undertaken lightly, and in many markets and metropolitan areas homebuyers wind up paying more in the long term. In the following ten metropolitan regions, it is better to rent, unless you plan to remain in your home long after your mortgage is paid off.
The Top Ten Places to Rent
San Francisco Bay Area / Silicon Valley, CA (San Jose-Sunnyvale-Santa Clara, San Francisco-Redwood City, San Rafael)
San Luis Obispo-Paso Robles-Arroyo Grande, CA
Rocky Mount, NC
Nassau County-Suffolk County, NY
The inherent advantage of home ownership is everywhere the same: building equity with every mortgage payment and eventually owning your home outright after at most 30 years. In the following ten metropolitan areas, prospective homebuyers are at the greatest advantage compared to those who choose to rent: homes are relatively less expensive, while rents are comparatively higher. In these markets, homeowners come out ahead long before their mortgage is paid in full. For those with deeper pockets, you might want to consider an investment and/or rental property in these metropolitan areas.
The Top Ten Places to Own
Naples-Immokalee-Marco Island, FL
Atlantic City-Hammonton, NJ
East Stroudsburg, PA
Port St. Lucie, FL
El Paso, TX
Corpus Christi, TX
How to Get More Out of Your Money
One sure way to make your hard-earned money go a little further is by getting a great cash back credit card . Not only will you be making money back with every purchase, but they can be great for financing a big purchase or paying down some existing debt.
Get the Most Money Back On All of Your Purchases
The Citi Double Cash is probably the best cashback card on the market in terms of return for your everyday spending. It’s simple: You’ll get 1% back when you make a purchase and another 1% when you pay your bill.
Citi® Double Cash Card – 18 month BT offer
- Earn 2% cash back on purchases: 1% when you buy plus 1% as you pay
- Balance Transfers do not earn cash back
- 0% Intro APR on Balance Transfers for 18 months. After that, the variable APR will be 15.49% - 25.49% based on your creditworthiness
- Click 'Apply Now' to see the applicable balance transfer fee and how making a balance transfer impacts interest on purchases
- 3% foreign transaction fee
- + No categories to track, no caps on cash back, no annual fee
That means that if you keep up with your card payments—and everyone should—you’ll get a great 2% back on all purchases. That’s hard to beat.
Pay Off Some Debt With 0% APR
If, however, you need to get on top of some debt or you’re planning to make big purchase soon, you should consider the Capital One Quicksilver card. It offers 1.5% back on all purchases and 15 months of interest-free financing on both balance transfers and purchases.
Capital One® Quicksilver® Cash Rewards Credit Card
- % Earn unlimited 1.5% cash back on every purchase, every day
- One-time $150 cash bonus after you spend $500 on purchases within 3 months from account opening
- No rotating categories or sign-ups needed to earn cash rewards; plus, cash back won't expire for the life of the account and there's no limit to how much you can earn
- 0% intro APR on purchases for 15 months; 14.74%-24.74% variable APR after that
- 0% intro APR on balance transfers for 15 months; 14.74%-24.74% variable APR after that; 3% fee on the amounts transferred within the first 15 months
- Pay no annual fee or foreign transaction fees
If you’ve got an outstanding balance on a high-interest credit card that you just can’t seem to pay off, this is the card for you.
Earn Big Bonus Dollars
Sometimes it’s nice to earn some free cash. With the Wells Fargo Cash Wise Visa, you’ll get $200 just for spending $1,000 on the card within the first three months. You’ll also get 1.5% cashback on all of your purchases.
Wells Fargo Cash Wise Visa® Card
- + Earn unlimited 1.5% cash rewards on purchases
- + Enjoy 1.8% cash rewards on qualified mobile wallet purchases, like Apple Pay® or Google Pay™, during the first 12 months from account opening
- No category restrictions or sign ups and cash rewards don't expire as long as your account remains open
- $0 Annual Fee
- Earn a $200 cash rewards bonus after spending $1,000 in the first 3 months
- Get up to $600 protection on your cell phone (subject to $25 deductible) against covered damage or theft when you pay your monthly cellular telephone bill with your Wells Fargo Cash Wise Visa® Card
- 0% Intro APR for 12 months on purchases and balance transfers (fees apply), then a 15.74%-26.74% variable APR; balance transfers made within 120 days qualify for the intro rates and fees
- Select "Apply Now" to learn more about the product features, terms, and conditions
- 3% foreign transaction fee
There’s a Card for You
Whatever you’re looking for, there’s a cashback card to fit your needs. Jump in with a big sign-up bonus, finance a big purchase with 0% APR, or earn great rewards on everyday purchases. The choice is yours.
RewardExpert analyzed average home sale price and monthly rent data from Trulia at the level of the Census Bureau defined Core-Based Statistical Area for 281 of the 300 largest metropolitan areas in the U.S. to determine in which ones it is most advantageous to rent, and in which it is most advantageous to buy a home at the local average price, with a 30-year fixed-rate mortgage and a 20 percent down payment.
We calculated the total cost of buying a home over the life of the mortgage loan using a standard amortization formula, at a 4.4 percent annual interest rate, with a starting principal balance of 80 percent of the average sale price, as the sum total of 360 monthly payments and the 20 percent down payment. We calculated the total amount of rent that would be paid at current rates over the same period of time, and then the difference between these totals. We ranked metropolitan areas based upon the amount of time it would take for rent payments to outstrip the total cost of purchasing with a 30-year mortgage.