For the past few years, frustrated home buyers have been able to take some comfort in the fact that, in many parts of the country, renting a home has been cheaper than owning one with a mortgage. According to a recent study by LendingTree, in 2021, the difference between median gross rent and median costs for homes with a mortgage in the nation’s 50 largest metro areas was $564 a month.
That’s a nice chunk of savings for renters over the course of a year. Unfortunately, it wasn’t as much as in 2019, when renters paid an average of $593 less each month than homeowners with mortgages. The narrowing gap is explained in part by the falling mortgage rates of that time, which reduced monthly costs for many owners. (LendingTree’s study compared the Census Bureau’s 2019 American Community Survey data against the data from 2021, the latest available. If you bought or refinanced a home in 2021, congratulations: your interest rate is probably as low as it will ever be.)
Three metros with very expensive homes — San Jose, Calif., New York and San Francisco — had the largest average gap between renting and buying in 2021: $1,262. Bucking the prevailing trend, the gap in these pricey metros widened. The smallest gaps were found in Orlando, Fla., Phoenix and Jacksonville, Fla., averaging out to just $252.
To arrive at their rankings, LendingTree researchers compared the median cost of rent with the median cost of owning a home in each metro area. Various expenses were included for both types of properties, including mortgages, home equity loans, property taxes, insurance, utilities, HOA or maintenance fees. Potential tax savings from deductions on mortgage interest and property taxes could not accurately be factored into the study.
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