It's Cheaper to Buy -- Especially When 5-Bedroom Homes Cost $40,000
"You want how much for this place?"
That's a common refrain in the real estate market, whether you're looking to buy or rent. Of course, places like New York, San Francisco, and Seattle have long been known as locations where wannabe buyers are quickly priced out of their homeownership dreams.
But the opposite is true in some surprising cities, where paying rent just doesn't make sense when cheap homeownership options are all around.
Down Payment vs. Security Deposit
According to the folks at real-estate website Trulia.com, in most of the top 50 U.S. cities, it makes more sense to buy a home than to pay rent month after month. Trulia's number crunchers found that the top five cities where it's cheapest to buy than rent are: Fresno, Calif; Mesa, Ariz.; Las Vegas; Detroit, and Arlington, Texas. But many others make the list, too, such as Philadelphia, Cleveland, Denver, San Diego, Washington, D.C., and Tucson, Ariz.
From New York to Omaha, here's a rundown of five cities where it's cheaper to buy than rent, and five where you're better off paying a landlord instead.
Thanks to foreclosures, in many places there's an increased supply of homes on the market. Couple that with ultra-low interest rates, and the scale tilts even more in favor of buying.
1. Las Vegas
Home to a neon museum and drive-through wedding chapels, Las Vegas tops the cheaper-to-buy list. If you're looking to work there, major companies headquartered in the city include MGM Resorts (MGM).
Typical rental prices range from $700 to $900 per month. Per Trulia, buying a home would lower your monthly outlay to less than $300 a month. The median home sale price there as of July was $115,200, down nearly 15% over year-ago levels. There are million-dollar homes there, but you can also get a 3-bedroom, 2-bath, 1,600-square-foot home for $49,000 -- which translates to about a $300 mortgage payment per month.
Besides cars, Detroit is also known for its chili dogs with onions and for being the home of Rosa Parks, Aretha Franklin, and Robin Williams. Major companies based in the area include General Motors (GM).
Typical rental prices range from $700 to $900 per month. However, for $40,000, you might snag a 5-bedroom, 4-bath, 1,700-square-foot home with a monthly payment less than $250. Per Trulia, the median home sale price as of July was $65,000, down 9% over last year.
This city is easy to get to, as its international airport is the busiest in the world. Major companies based there include Coca-Cola (KO).
Typical rental prices range from $1,050 to $1,550. The median home sale price as of July was $192,500, up 3% over year-ago levels. For $115,000, you might buy a 3-bedroom, 1-bath, 1,200-square-foot home with a monthly payment less than $700.
Chicago is home to Oprah Winfrey, movie critic Roger Ebert, and an annual Beatles festival, and it could be your home, too.
Rent in the Windy City will run you around $1,450 to $1,950. But for $220,000, you might buy a 3-bedroom, 2.5-bath, 1,500-square-foot home with a monthly payment of $1,300. Per Trulia, the median home sale price as of July was $211,000, down 15% over year-ago levels.
Enjoy this city's 170 parks in the summer and go ice-fishing nearby in the winter.
Typical rental prices range from $1,050 to $1,550. You can trim that monthly tab by buying. Per Trulia, the median home sale price as of July was $155,000, down 7% over year-ago levels. For $225,000, you might buy a 4-bedroom, 1.5-bath, 1,700-square-foot home with a monthly payment around $1,300.
5 places where you're better off ponying up for rent
Home ownership can be costly. Besides the mortgage, you've got taxes, insurance, repairs, and upkeep. Renting a place to live instead of buying one can often seem like a good deal. It actually is, in several major U.S. cities.
Despite the many cities offering compelling home purchases, there are still some metropolises where it remains cheaper to rent.
1. New York
Less than a mile wide at Manhattan's narrowest point, New York will be home to the largest Gothic cathedral in the world whenever the Cathedral of St. John the Divine is finished. (It was started in the 1800s.) There are plenty of finished homes for sale there, though.
The median home sale price as of July was $1,080,000, up 3% over year-ago levels. Rents here range from $3,150 to $3,650. But for $2,000 per month, you might find a 1-bedroom, 1-bath 850 square-foot apartment on West 42nd Street.
2. Fort Worth
Appropriately, given the city's name, 60% of America's paper money is printed in Fort Worth. Major companies based in the area include American Airlines parent AMR (AMR).
The median home sale price as of July was $100,500, up a whopping 18% over year-ago levels. Typical rental prices range from $700 to $900.
Omaha is the home of the College World Series and Warren Buffett's Berkshire Hathaway (BRK), which owns, among many other things, Borsheim's and Nebraska Furniture Mart -- the largest jewelry and furniture stores in Omaha and the United States, respectively. Other major companies based there include Union Pacific (UNP) and ConAgra (CAG).
The median home sale price as of July was up 10% over year-ago levels, currently sitting at $176,000. Typical rental prices range from $700 to $900.
Some think of Seattle as rainy, but it gets less rain, on average, than Boston, New York, or Houston. Major companies based in the area include Amazon.com (AMZN) and Starbucks (SBUX).
The median home sale price as of July was $340,000, down 10% over year-ago levels. Typical rental prices range from $1,250 to $1,750.
5. San Francisco
Fortune cookies were born in San Francisco, and its cable cars are the nation's only moving National Historic Landmark.
The median home sale price as of July was $676,000, up 4% over year-ago levels. Typical rental prices range from $2,850 to $3,350.
Whether you buy or rent, do so having crunched some numbers, to make sure you're not disregarding the better strategy.
At Trulia, you can get more info on each of the cities, such as their unemployment rates, foreclosures, job growth, and job competition.
Longtime Motley Fool contributor Selena Maranjian owns shares of Berkshire Hathaway, Coca-Cola, and Starbucks, but she holds no other position in any company mentioned. Click here to see her holdings and a short bio. The Motley Fool owns shares of Berkshire Hathaway, Coca-Cola, and Starbucks. Motley Fool newsletter services have recommended buying shares of Berkshire Hathaway, GM, Starbucks, Amazon.com, and Coca-Cola.