Is it Really Cheaper to Own a Home than to Rent One?


There are a lot of different things you will need to think about when deciding where you want to live. Your work and social life, the type of structure you hope to live in, the neighborhood you will be living in, and other variables should all be top-of-mind whenever you are comparing your available options.

However, in addition to thinking about variables related to the prospective homes themselves, you will also need to think about the ownership structure of your home—specifically, you will eventually need to decide whether you want to buy or rent.

As you’d expect, both buying and renting a home will come with their fair share of pros and cons. Renting a home is generally much easier to qualify for and requires much less of a commitment. But contrary to what conventional wisdom might tell you, renting is not always the cheapest living option available. In fact, as a recent Axios report has revealed, owning a home is actually the cheapest option for the majority of American counties.

Let’s take a closer look at where it is cheaper to buy than to rent a home and discuss how recent trends might affect your final decision.

Where is it Cheaper to Buy than to Rent?

Recently (2022), ATTOM—described as “the nation’s premier property database”—released a comprehensive report that analyzed renting and homeownership markets in 1,154 of the nation’s most populated counties. After gathering data from the US Department of Housing and Urban Development (HUD) and other sources, the data report concluded that owning a home is more affordable than renting in about 58 percent of all counties examined.

A quick look at the data reveals some pretty clear trends. Generally speaking, owning a home is cheaper in suburban, exurban, and rural counties, especially when these counties are located in the Midwest, South, and Northeast. On the other hand, renting is more affordable than buying in the nation’s most densely populated cities, as well as the Western region, in general. This makes sense because the cost of land—a huge factor when it comes to the cost of buying a home—is harder to come by in dense cities and the geographically rugged west.

In other words, where land is cheaper, the monthly cost advantage that comes with choosing to buy a home will likely be greater. And though the recent study only measured the most populated counties in the nation, it is clear that owning a home would almost certainly be more advantageous in the less densely populated counties that were excluded.


The Added Benefits (and Costs) of Homeownership

The data used for this study compared monthly mortgage payments to monthly rent payments. However, a true cost-benefit analysis of owning or renting a home ought to incorporate other crucial factors as well.

When you choose to rent a home, the money you pay in rent every month is given to your landlord and you will never be able to use it again. When you buy, on the other hand, a significant portion of that money is “given back” to you in the form of equity—though you will still need to make your monthly mortgage payments, not all of the money is actually lost. Additionally, home prices have been increasing at a rate of nearly 10 percent per year. This represents an additional method for generating equity that is unavailable to renters.

At the same time, homeowners will also need to consider the extra costs that come with homeownership. Property taxes, relatively higher bills, property insurance, homeowner’s association fees, and private mortgage insurance (when applicable) can all impact your monthly budget. You’ll also need to consider the future cost of selling your home (usually about 5-10 percent of the home’s value), which can negate some of your gains if you need to move shortly after buying a home.


So, is Now the Right Time to Buy?

Both buying and renting have benefits and drawbacks. When you buy, you can build equity and also often enjoy a larger property that you can proudly call your own. When you rent, you are less financially tied down, but you will also not be able to build equity over time—and, current home value is by far the largest source of family equity in the United States.

Whether right now is the time for you to buy will depend on a variety of factors. If you live in a non-urban (non-western) area, the median cost of a three-bedroom home will usually be cheaper than renting. And with home values increasing faster than median wages, there might also be some urgency to buy now. As we’d recommend with any major financial choices, you should account for all personal factors and carefully explore your options before making a final commitment.


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