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16 cities where it's cheaper to rent than to own


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2018 May 8, 8:20pm   2,545 views  9 comments

by Patrick   ➕follow (55)   💰tip   ignore  

https://www.urban.org/urban-wire/17-cities-rent-gap-makes-it-cheaper-average-own-rent

In 16 of the 33 MSAs, it’s cheaper to rent than to buy a home, sometimes significantly so. The most extreme example is San Francisco, the most expensive city for homeownership. Monthly payments for a mortgage on the median-priced house with 3.5 percent down takes up 80 percent of the median borrower’s income. This is significantly more expensive than renting, where the borrower making the median income would pay 37 percent of that income in rent. The rent gap is nearly 43 percent.

Other cities on the West Coast show a similar trend, though none as extreme as San Francisco. In Seattle, which ranks seventh in the cost of homeownership, renting is also the cheaper option. A borrower who buys a home with a low down payment there can expect to pay an additional 8.6 percent of their income on housing.


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1   Sunnyvale94087   2018 May 9, 1:56am  

I think my shack in Sunnyvale is 107% more to buy.

According to Zillow it costs $2.1M and rents for $4.1k/month.

To purchase, suppose you could put down no down payment at all (just like if you rent). Suppose you are just paying the interest on that full amount loan (just like if you rent — you aren't paying principal on the place). Suppose, also, that without a down payment and with interest-only, you can still get a very nice 4% interest rate (rate usually reserved for 20% down and interest+principal).

So, to "buy" with $0 down and interest-only loan:
* the interest on a 4% loan is $7k/month, but "only" $6k/month if you consider (limited) home mortgage interest deduction
* the property taxes on the house are $1900/month ($2.1M 1.1% / 12)
 the maintenance is probably $500/month (or more — this is a 55 year old house)

Note that if you can afford the house, your income will be so high that you will not be able to take off any income tax deductions for the property taxes.

So, a person looking to buy my shack will be paying $6k + $1.9k + $0.5k = $8500 per month of complete waste (i.e.: not building equity at all)

The $8500/month figure to buy compares to a $4100/month figure to rent.

Yikes!
2   bob2356   2018 May 9, 4:05am  

pwagner says

So, a person looking to buy my shack will be paying $6k + $1.9k + $0.5k = $8500 per month of complete waste (i.e.: not building equity at all)


Not at all true, real estate always goes up. Ask the NAR.
3   MrBark   2018 May 9, 10:17am  

$500/month maintenance on a house built in 1963. LOL delusional.
4   SunnyvaleCA   2018 May 9, 10:51am  

MrBark says
$500/month maintenance on a house built in 1963. LOL delusional.



I do much of the maintenance myself. (Which is, of course, yet another expense in tools and time.) I already have new roof and windows, so the remaining problems are electrical and plumbing, which really amounts to a large number of small annoyances which I can fix.

But, yeah, I was being "generous" to the homeowner when saying $500/month in repairs.
5   SunnyvaleCA   2018 May 9, 10:52am  

bob2356 says
Not at all true, real estate always goes up. Ask the NAR.


And, also according to the NAR, it's completely reasonable to pay $120,000 in commission when I sell my shack!
6   mmmarvel   2018 May 9, 11:05am  

What I find amusing is that the Houston line includes The Woodlands and Sugar Land which are basically suburbs of Houston but are two of the MOST expensive suburbs in the area. You want to really be fair include suburbs like Missouri City (where I live) and Humble, then that line would go down even further.
7   rootvg   2018 May 9, 11:50am  

SunnyvaleCA says
bob2356 says
Not at all true, real estate always goes up. Ask the NAR.


And, also according to the NAR, it's completely reasonable to pay $120,000 in commission when I sell my shack!

What makes the most sense is to completely back away from this whole damn place before the bust we all know is coming.

I don't want to hear any bullshit about "it's different this time" because it never fucking is.

My father spent forty goddamn years in insurance and real estate. Everyone who came to the house sold real estate, insurance, cars or money for a living. My wife and I didn't fall off the shit wagon yesterday and we don't subscribe to the usual California cultural thing where everyone nods their head to be accepted socially.

We can't leave so we're preparing...and waiting.
8   MrBark   2018 May 9, 1:07pm  

If y'all are spending 500-1000 per month to maintain a home, that's pretty damn hilarious. What is it gold plated?
9   NuttBoxer   2018 May 9, 1:42pm  

Gives some support to my position for continuing to rent while living in SD.

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