Despite recent price increases in many markets, it’s now cheaper to own a home than rent in all 100 of the largest U.S. metro areas, thanks to climbing rents and low mortgage rates and tax breaks for homeowners, according to a rent-vs.-buy report released today by real estate search site Trulia.
Homeownership is most affordable in Detroit, the report found, where the monthly cost of owning a home ($349) was 70 percent cheaper than renting one ($1,149). Gary, Ind., and Oklahoma City, Okla., both with monthly homeownership costs that were 63 percent cheaper than renting, were No. 2 and No. 3 in the report, respectively, for U.S. homeownership affordability.
Downtown Detroit image via Shutterstock.
For its analysis, Trulia averaged the price of homes for sale and for rent on its site in each metro from June 1, 2012, to Aug. 31, 2012. For homeownership costs, the report took into account closing costs, maintenance, insurance, property taxes and other costs. The report assumed homes would be sold after seven years and that owners were in the 25 percent federal income tax bracket, itemized their deductions, and could obtain a mortgage at a rate of 3.5 percent. Renting cost calculations included renters insurance and deposit.
Top 10 metros with highest homeownership affordability
| U.S. Metro | Monthly cost of homeownership ($) | Monthly cost of renting ($) | Difference ($) | Difference (%) |
| Detroit, Mich. | $349 | $1,149 | -$800 | -70% |
| Gary, Ind. | $616 | $1,649 | -$1,033 | -63% |
| Oklahoma City, Okla. | $590 | $1,576 | -$987 | -63% |
| Lakeland-Winter Haven, Fla. | $495 | $1,276 | -$781 | -61% |
| Toledo, Ohio | $476 | $1,222 | -$746 | -61% |
| Memphis, Tenn.-Miss.-Ark. | $548 | $1,389 | -$841 | -61% |
| Warren-Troy-Farmington Hills, Mich. | $588 | $1,494 | -$907 | -61% |
| Cleveland, Ohio | $585 | $1,464 | -$879 | -60% |
| West Palm Beach, Fla. | $723 | $1,764 | -$1,041 | -59% |
| Birmingham, Ala. | $515 | $1,247 | -$732 | -59% |
Source: Trulia
The difference between the cost of owning and renting was least pronounced in Honolulu (24 percent), San Francisco (28 percent) and New York, N.Y. (31 percent).
"Homeownership makes the most financial sense for people whose strong credit scores let them snag the lowest mortgage rate and who get the biggest benefit from deducting mortgage interest and property taxes from their income taxes," said Jed Kolko, Trulia’s chief economist, in a statement.
Top 10 metros with least difference between owning and renting
| U.S. Metro | Monthly cost of homeownership ($) | Monthly cost of renting ($) | Difference ($) | Difference (%) |
| Honolulu | $1,519 | $2,007 | -$488 | -24% |
| San Francisco | $2,327 | $3,226 | -$899 | -28% |
| New York, N.Y.-N.J. | $1,857 | $2,687 | -$831 | -31% |
| San Jose, Calif. | $1,819 | $2,646 | -$827 | -31% |
| Los Angeles | $1,379 | $2,020 | -$641 | -32% |
| Ventura County, Calif. | $1,516 | $2,274 | -$759 | -33% |
| Orange County, Calif. | $1,610 | $2,423 | -$813 | -34% |
| San Diego | $1,314 | $1,981 | -$667 | -34% |
| Albany, N.Y. | $999 | $1,535 | -$536 | -35% |
| Long Island, N.Y. | $1,603 | $2,513 | -$910 | -36% |
Source: Trulia
The report also shows how the costs of homeownership rise in relation to renting when some of the assumptions like tax bracket, length of stay in the home and mortgage rate change. For example, owning a home in the New York metro becomes 3 percent more expensive than renting when the mortgage rate is 4.5 percent, the homeowner does not take advantage of the mortgage interest tax deduction, and stays in the home for only five years.
Although Trulia’s report shows that homeownership makes economic sense in all of the 100 largest U.S. metros, a May 2012 Rent.com survey of 500 renters showed that 61 percent of respondents had delayed homeownership for financial reasons, including rising down payment requirements and the need for higher credit scores to get home loans.
