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The old saying that it’s cheaper to buy a house rather than renting one has proven more and more true as years go by.
A new survey released Wednesday shows that renting a home remains significantly cheaper than buying it in all of California’s biggest metropolitan areas.
The study, conducted by financial analysis website Bankrate, found that monthly mortgage payments, which are far more than rents in the state’s high-cost housing market, are in line with national trends.
This study compared the average monthly rent to the average monthly mortgage payments in the 50 largest US metropolitan areas.
The biggest inconsistency in the US is San Francisco, where typical mortgage payments are over 190% higher than the average rent price. San Jose ranked second in the nation by a 186% margin.
Seattle, Denver and Salt Lake rounded out the top five.
In the Los Angeles land, the gap was 88.5%, but in the San Diego Metro area it was nearly 80%. Los Angeles and San Diego ranked sixth and nineth in the nation, respectively. Other expensive markets like Portland and Austin have also made the list.
“Lovers in big cities would prefer to rent out rather than buy a home in the more expensive coastal metropolitan area,” said Bankrate analyst Alex Gary. “Even if the inventory of homes improves, the high mortgage fees, property taxes and insurance premiums continue to withdraw prices from many buyers.”
The top five metro areas with the biggest differences between rental and purchase were all on the west side, led by:
San Francisco/Oakland/Berkeley: $3,055 rent vs $8,882 mortgage (190.7% difference) San Jose/Santa Clara: $3,305 rent vs $9,438 mortgage (185.6%) Seattle: $2,265 rental vs. $4,971 $4,927 (96.5%) Salt Lake City: $1,680 rent vs. $3,197 mortgage (90.4%)
Nationally, median home average mortgage payments rose to $2,768 a month from $2,703 last year. In contrast, the national average rent was stable at around $2,000, with an average of 38% cheaper.
Rents remain more affordable than buying in all 50 largest US metro areas, but the cost gap is much smaller in some Midwest and Southern cities where home prices and cost of living are generally low.
According to Bankrate, the five smallest metro areas between average monthly rent and mortgage payments are:
Detroit: $1,481 rent vs $1,515 mortgage (2.3% difference) Pittsburgh: $1,452 rent vs $1,601 mortgage (10.3%) Philadelphia Metro Area: $1,901 rent vs $2,121 mortgage (11.5%) Crebrand: $1,419 rental vs. Tampa/st. Petersburg, Fla.: $2,140 rent vs $2,587 mortgage (20.9%)
The methodology for the study included data from Redfin, Zillow and Bankrate’s own mortgage and premium surveys, officials said. It assumes a 20% down payment, HOA fee or PMI, and includes average property taxes and insurance fees via Metro.
The complete results and methodology are available at https://www.bankrate.com/real-estate/rent-vs-buy-abbordability-study.
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