Cost to Buy Instead of Rent a Home in 21 Major Cities

Cost to Buy Instead of Rent a Home in 21 Major Cities

It’s an age old dilemma: Should you be renting or buying? Which is less expensive in the long run? How about in the immediate-term?

According to a recent report by Erik Franks of John Burns Real Estate Consulting, it costs more to own a home than to rent in most major American cities, particularly in the smaller, socially-conscious “urban burbs” that are in high demand with millennials. "What? That's not what I expected you to say," you say. Keep reading...

The National Average vs. The Chicago Exception

For his study, Franks compared renting an apartment in a large apartment complex and buying a home valued at 80% of the median home price with a 95% LTV loan (or a down payment of only 5%).

For some parts of the country, the findings are staggering. Look at California, for instance: In San Diego, it costs almost $800 more a month to own an entry-level home than to rent an apartment.  In San Francisco, that gap is more than $2500. These are both above the national average for home ownership premium over renting, which is $146 per month.

In Chicago, however, the study reveals that the premium for home ownership is not a premium at all, its actually less expensive than renting, by more than $340 per month. That's the best rate in the country. To compare, take a look at this compelling infographic:

These findings line up with those of the Beracha, Hardin, and Johnson "Buy vs. Rent" national housing market index, which lists Chicago as one of four territories where home ownership is more attractive than renting.

As we’ve shared before, millennials should consider buying in Chicago for a number of reasons. A stable population and consistent demand mean that buying a home in Chicago is historically a secure path to wealth accumulation.

We’ve also found that it is much more economical to buy a home than to rent here in Chicago: As of 2014, the market required 29.5% of your income to afford median rent, compared to only 15.3% to afford a median home.

So when you’re ready to take the plunge, we have the tools and guides that will make buying your new home a snap. We offer 30 years of combined experience and affordable listings all over Chicago. Drop us a line and we’ll help you get started on the path to home ownership! 

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