If you think you’re throwing away money on rent, take heart: With interest rates on 30-year fixed-rate mortgages now at 20-year highs, homeowners with loans may be worried about the very same thing. So, imagine for a moment that your monthly rent payment did go toward a mortgage payment instead. How much space would that buy in your city?
A recent study by Point2 answered this question for renters in the 100 largest U.S. cities, using the local median price per square foot to find just how much space the local average rent could afford if it were a mortgage payment. The study assumed a 20 percent down payment and a monthly 30-year-fixed-rate mortgage payment at 6.78 percent (the rate at the time the study was published), and factored in local homeowners’ insurance and property taxes on the median-priced home.
In 63 of 100 cities, the average rent would support the mortgage on a home of less than 1,000 square feet — much smaller than the typical U.S. house. In Fremont, Calif., just across San Francisco Bay from Palo Alto, the average rent of $2,758 would buy just 506 square feet of space if a renter got a mortgage for precisely that amount. That payment would support the mortgage on a home costing $447,283 — and good luck finding that in Fremont, where the median sale price is roughly $1.4 million.
A tad more space could be found in Honolulu, where the average rent of $2,233 would get 548 square feet if it were a mortgage payment. San Francisco and San Jose, Calif., were the only other cities where the average rent wouldn’t get you even 600 square feet. In New York, the average rent of $4,454 buys just 728 square feet. Drilling down into the boroughs, in Manhattan you’d get just 473 square feet, and in Brooklyn a few more, 504 square feet.
So where would you get the most space if you spent your rent money on a mortgage? The answer is Detroit, where the median rent of $1,215 could buy an expansive 2,421 square feet.
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