Renting Is Cheaper Than Buying in All 50 Major Metro Areas in the United States

Any one else questioning the study methodology? They just compared the average rent payment vs the average mortgage payment?<p>The average home owner is better off than the average renter so they&#x27;re buying nicer places. The study made no effort to correct for this. Seems like their conclusions is a given.

I made a spread sheet comparing renting to buying a few years ago. The premise was that I wanted to compare my investment in my home vs. paying less to rent and investing the difference in the stock market. The assumptions were something like a 3.5% mortgage rate (30y) and 4% appreciation on my home, vs. a 7% appreciation in the market.<p>What I found is that on a time horizon of ~7 years, it absolutely makes sense to buy a home. The reason is that when you have a mortgage, you&#x27;re making a highly leveraged investment. If you buy a house for 100k and put 20k down, then you&#x27;re 5x leveraged. If you&#x27;re able to sell the house for 110k. The price has increased 10%, but your ROI is 50%.<p>There was a definite inflection point after 7 years, however, where the amount of leverage decreases to the point that the higher gains in the market begin to dominate the modest increase in home value.

Isn&#x27;t this generally always the case?<p>I&#x27;ve always understood that when you buy you should expect to be paying more than a renter for maybe 5-10 years. At least in the US mortgage payments are almost always fixed whereas rents are almost never fixed or controlled.<p>Rent just rises forever in most cities and usually mortgage payments of people who have owned for 10 years look like amazing bargains.

This is literally a no-brainer, especially when the hidden costs of home ownership aren&#x27;t even factored into this: Septic tank needs emptying? Years of built-up termite damage finally rears its ugly head? HVAC broke in the middle of the night? Don&#x27;t have to worry about those costs when renting.

I mean, maybe, but only for right now. Almost all mortgages are fixed-rate and virtually every rental increases every year. The very short article glosses over the tax advantages and security of owning but skips basically everything important.<p>Most leases are written to convert to month-to-month, and in most states this is the default if not written. <i>In all states but 3 + DC</i> landlord can unilaterally terminate month-to-month tenancy with proper notice. Usually this is 30 days or one calendar month, in 9 states it is less than that (lowest is 3 days in CT, 10 days in Louisiana) and in 6 states it is always or sometimes more than 30 (e.g. 60 days in NY after 1 yr, 90 after 2 yrs).

These rental figures don&#x27;t seem to hold up to scrutiny. The median rent in NYC is $1,400? How did the source (Lendingtree) come up with these?

&quot;Cheap&quot; is a terrible argument for an investment decision!<p>If the free market finds a better way to supply housing (prefabs, 3d printing, bigger apartment complexes), then the cost of housing will fall, and thus the speculation on housing prices going up will not work out in the owner&#x27;s favor, inflation or not, but at least the mortgage payments build equity instead of going into someone else&#x27;s pocket.<p>Will the speculated increase in resale value outpace maintenance cost? Not if the resale value goes down for any reason, but then the sum of maintenance cost plus lost value would still need to be more than the rent.<p>Since housing prices are going up right now, and maintenance while expensive is not more than the value of the home equity, it really does make sense to buy, even at high prices, right?<p>However, if renting is substantially cheaper than buying, then you could dollar cost average the difference into stocks, and potentially make more. That is also speculative and depends on future stock returns.<p>Finally, some folks can only afford the cheaper option. For them, it&#x27;s not really a choice...<p>crunch numbers...don&#x27;t just guess

I guess based on averages, this can be true. For Raleigh, NC they list the rent ~$1100 and mortgage ~$1500.<p>I have a 15yr fixed mortgage at 2.75% which I started with 20% down to avoid PMI. All-in (HOA, utilities, principle, interest, insurance, maintenance) I am paying ~$1200. And that&#x27;s to live by myself, in a two-story, 1400sq.ft. townhome. We have a lovely community pool too.<p>There is no way I could pay that little renting a place with equivalent offerings. If I picked up a roommate or two? Sure, but that&#x27;s not something I&#x27;m willing to compromise on. Keep in mind I have a more aggressive 15yr mortgage. The difference would be even wider in monthly cost for a 30yr.

Fixed rate mortgage payments are constant, but rents rise with inflation. If people expect high inflation, that may explain why rents look cheap compared to current mortgage payments on comparable residences.

Something I&#x27;ve thought about quite a bit here - for renters don&#x27;t you worry about being unable to control housing prices long term? I have maintenance on my house and taxes, but I can generally control both (for example I can have my house painted now or wait a year or 2). Rent prices may go up 20% without any input from you. Secondly - do renters move more than owners? How does that work if you have kids in school? I would think ownership provides more stability than renting, but I have no data on whether renters move more or not.

So maybe a dumb question but how can this possibly be true without landlords losing their shirt? If it is cheaper to rent the building then to own it? They only thing I can think is this not and apples to apples comparison i.e. maybe the average rental was 900sqft apartment vs 1300sqft condo or something.

I live in the UK, and renting is definitely always more expensive<p>Also when buying if I extend my mortgage to 35 years I can pay 550 a month, or I can reduce to 25 and pay 900 or more because it is a worth investment place to put your money<p>So I am only paying more if I want, and that is because it is also my savings, more rentable than a savings account anywhere

As far back as I can remember this has always been the case. Sometimes there’s weird situations where buying is cheaper but generally, when looking at the immediate term renting is cheaper.<p>But it’s pretty dumb to do an analysis like this NYT article as it’s important to factor in some amount of time for decision making. These can get pretty complicated but just a basic personal model factoring in 2-3% annual increases in rent compared against ownership costs is what I used to choose rent over buy.<p>It can be used for a specific decision (eg, “I’m going to live in Fooberg for 5 years, what should I do?”) or macro life planning (eg, “I’m going to live for 60 more years, what should I do?”).<p>It’s funny how these articles are so clickbaity and missing on basic reporting and analysis. I think it’s based on the few people who actually sub to the NYT like reading about populist stuff (eg, landlords bad, can’t afford to buy).<p>Of course these things are true, but they’re always true. Maybe it was awesome in 1945, but it was super hard for someone in their 20s to buy a house in the 80s and 90s and it’s super hard now. Tl;dr; you probably still want to buy a place in 9&#x2F;10 situations since rent goes up and mortgage is fixed and eventually ends (although taxes and insurance and maintenance sort of index to inflation).