With home prices soaring and all the news that the housing market is on a definitive recovery track, it begs the question: Is it still cheaper to buy? Home values nosedived around the country after the housing crash, and it became so much more economically efficient to buy at the lows than rent. And even though home prices are rebounding, it still makes more sense to buy than rent in many U.S. metros.
But there's nowhere else in the country where it makes less sense to rent than buy than in these nine cities. 24/7 Wall St. analyzed data from Trulia to determine the areas where buying is cheapest compared to renting. Most of the towns are in the Rust Belt where economic instability has persisted, which has kept home prices low. Factors considered in coming up with the list include cost of moving, rent appreciation, inflation and mortgage costs of 20% down payment on a 30-year fixed mortgage at a rate equal to the national average of 3.5%. 24/7 also looked at unemployment figures and home price changes in the areas.
9 Cities Where Renting Makes No Sense
9 Cities Where Renting Makes No Sense
Pct. savings, buying vs. renting: -59% Monthly cost of ownership: $504 (5th lowest) Monthly cost of rent: $1,232 (18th lowest) 10-yr. employment change: -1.0%
Birmingham has the nation’s fifth lowest monthly cost of homeownership at just over $500 a month. The cost of renting, however, is nearly two and a half times the monthly cost of ownership. One reason for the low homeownership cost relative to rent cost could be that, last winter, the median home price in Birmingham declined by 7.5% from the year before. This leads to lower monthly mortgage payments and monthly costs for homeowners. Although not located in the Midwest, Birmingham, like many cities in Ohio and Michigan, has suffered for years from the loss of manufacturing jobs and a declining population.
Pct. savings, buying vs. renting: -60% Monthly cost of ownership: $503 (4th lowest) Monthly cost of rent: $1,260 (21st lowest) 10-yr. employment change: +1.5%
Economic growth in Kansas City has been stagnant in recent years. The Kansas City metro area’s output rose 2.7% from its lowest point during the recession to the current peak, versus an increase of 8.3% across the United States, according to Brookings. Despite the lagging output, the area’s median home sale prices rose 2.7% last winter from the previous year. Homes in Kansas City, however, remain very inexpensive. Owning a home in the area is estimated to cost only about $500 a month on average, one of the lowest figures in the nation.
Pct. savings, buying vs. renting: -62% (tied for 6th lowest) Monthly cost of ownership: $450 (2nd lowest) Monthly cost of rent: $1,194 (10th lowest) 10-yr. employment change: -6.4%
The average rent on a property in Toledo is less than $1,200 a month, which is among the lowest of any metro area in the United States. Still, homeownership is much cheaper. The estimated monthly cost of homeownership in the city is just $450 a month on average, trailing only Detroit nationwide. Toledo was once home to a large number of manufacturing workers, many of whom lost their jobs due to automation. According to the BLS, Toledo has lost more than 12,000 manufacturing jobs over the 10 years ending in January 2013.
Pct. savings, buying vs. renting: -62% (tied for 6th lowest) Monthly cost of ownership: $511 (7th lowest) Monthly cost of rent: $1,336 (35th lowest) 10-yr. employment change: -1.2%
Memphis has experienced moderate growth in recent years. Although it still trails the country as a whole, the Memphis area’s gross domestic product (GDP) has recovered more from its recession low than more than half of all metro areas examined, rising by 6.8%. Home prices also have risen, with the median sales price in Memphis up more than 15% last winter from a year before. The increase in home prices does not seem to have meaningfully affected the cost of home ownership. The monthly cost of home ownership is 62% cheaper than renting in 2013, versus a 61% discount the year before. Also, owning a home in Memphis is estimated to cost an average of just $511 a month -- among the lowest figures in the nation.
Pct. savings, buying vs. renting: -63% (tied for 2nd lowest) Monthly cost of ownership: $567 (17th lowest) Monthly cost of rent: $1,522 (44th highest) 10-yr. employment change: -11.8%
Despite its close proximity to Detroit, renters in the Warren area pay considerably more per month than those who rent in the Motor City. A typical rent in the area costs an estimated $1,522 a month, in the top half of all metro areas surveyed. By comparison, a typical rent in the Detroit area cost just $1,138 per month, the fourth lowest in the country. Owning a home in the area is also considerably cheaper than renting. A typical homeowner saves an estimated $955 per month versus renting -- a larger dollar amount than in all but eight metropolitan areas.
Pct. savings, buying vs. renting: -63% (tied for 2nd lowest) Monthly cost of ownership: $560 (14th lowest) Monthly cost of rent: $1,518 (45th highest) 10-yr. employment change: -5.0%
Homeowners in Gary are estimated to save $958 a month by owning rather than renting,the eighth largest dollar difference in the nation. Home ownership costs an estimated $560 a month, among the lowest figures in the nation. In addition to long-term population declines, Gary has lost 5% of its jobs in the past 10 years. Founded by U.S. Steel in 1906, Gary is a shell of the manufacturing sector it was even 10 years ago; the area had 41,000 manufacturing workers in January 2003, versus just 36,300 in January 2013.
Pct. savings, buying vs. renting: -63% (tied for 2nd lowest) Monthly cost of ownership: $469 (3rd lowest) Monthly cost of rent: $1,278 (28th lowest) 10-yr. employment change: -8.0%
Home ownership in Dayton, Ohio, costs just $469 a month -- the third lowest figure in the nation. This is despite the fact that home prices fell by just 26.2% peak-to-trough during the recession, a slightly smaller decline than the United States as a whole, at 28.4%. Like many cities in the Rust Belt, Dayton’s manufacturing sector has declined a great deal in recent years. Between January of 2003 and January of 2013, the number of manufacturing jobs in the area declined from more than 64,000 to just slightly more than 40,000.
Pct. savings, buying vs. renting: -63% (tied for 2nd lowest) Monthly cost of ownership: $541 (12th lowest) Monthly cost of rent: $1,462 (48th highest) 10-yr. employment change: -6.3%
Cleveland ranks as one of the least expensive places to own a home, at an estimated average of just $541 a month. Despite this, the metro area ranks in the top half of all areas analyzed by Trulia for the cost of renting. The area’s economy has struggled in recent years. Its GDP has risen just 2.7% since bottoming out in the third quarter of 2009, among the lowest recoveries in the nation. Manufacturing, still a major part of Cleveland’s economy, has shed jobs throughout the past decade. Area manufacturing employment fell from more than 157,000 jobs in January 2003 to less than 122,000 jobs in January 2013.
Pct. savings, buying vs. renting: -70% Monthly cost of ownership: $338 (the lowest) Monthly cost of rent: $1,138 (4th lowest) 10-yr. employment change: -15.1%
Detroit has the lowest cost of home ownership, at just $338 per month. Home prices fell by 46.9% from peak-to-trough in the Detroit metro area during the housing crisis, one of the steepest drops in the country. As of last October, Detroit had the nation’s highest vacancy rate, at more than 12% of area homes. The next highest vacancy rate measured was just below 7%. Problems in the area extend far beyond the housing market. In January, 10.6% of workers were unemployed, among the highest rates in the nation. In order to keep the city solvent, Governor Rick Snyder recently appointed an emergency manager to force it to make deep budget cuts.