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May 2, 2013

Sometimes Renting is a Much More Economical Option Than Buying: Top 10 Cities

by AvenueWest Managed Corporate Housing

A recent article posted at NBCNews.com Business uses Zillow’s Break Even Horizon to determine the top 10 cities where renting is more economically sound than buying and how long it takes on average to break even if purchasing a home. This figure is calculated based on the net cost of purchasing a home vs. renting the same house. Here are the top 10 cities renting costs less than buying:

1.

Top 10 Cities Where Renting is more economical than buying: New York City.

Top 10 Cities Where Renting is more economical than buying: New York City.

New York City, NY. Zillow Break Even Horizon: 5 Years; Zillow Rental Index: $2,016; Annual Change in Zillow Rent Index: 19.4%

Renting an apartment in the city would save more money than purchasing a home unless you were going to be living in NYC for more than 5 years. The average home price is $462,500. A 20% down payment is going to be $93,000 for a home this much and with the current rate of 3.277% and a 30 year fixed mortgage, you are looking at a monthly mortgage payment of $2,145 which is higher than the current rental index.

2.

Top 10 cities where renting is more economical than purchasing: Seattle, WA.

Top 10 cities where renting is more economical than purchasing: Seattle, WA.

Seattle, WA. Zillow Break Even Horizon: 4.3 Years; Zillow Rental Index: $1,850; Annual Change in Zillow Rent Index: 4.7%

Waterfront property in Seattle averages about $392,200 as of December 2012.

3.

Top 10 cities where renting is more economical than purchasing: Boston, MA.

Top 10 cities where renting is more economical than purchasing: Boston, MA.

Boston, MA. Zillow Break Even Horizon: 3.9 Years; Zillow Rental Index: $2,299; Annual Change in Zillow Rent Index: 11.3%

Based on 25 new single family homes for sale in Boston, MA, the average home costs $727,200. A 20% down payment is $145,000 with a 3.277% interest rate, your monthly mortgage payment would be $3,334. Renting in Boston on average would be a monthly savings of $1,035.

Washington, D.C. and San Francisco, CA tied for 4th for the amount of years it would take to break even if purchasing a home.

4.

Top 10 cities where renting is more economical than purchasing: Washington, D.C.

Top 10 cities where renting is more economical than purchasing: Washington, D.C.

Washington, D.C. Zillow Break Even Horizon: 3.7 Years; Zillow Rental Index: $2,439; Annual Change in Zillow Rent Index: 7%

There has been an increase in new home development in the D.C. area. As of December last year, the average home cost $402,400 which is up by 10%.

4.

Top 10 cities where renting is more economical than purchasing: San Francisco.

Top 10 cities where renting is more economical than purchasing: San Francisco.

San Francisco, CA. Zillow Break Even Horizon: 3.9 Years; Zillow Rental Index: $3,281; Annual Change in Zillow Rent Index: 12%

San Fran has seen an 18% increase in home sale prices year after year! Currently, the average home costs $770,600. A 20% down payment of $154,000 with the current interest rate of 3.277% would be a $3,529 monthly payment. By renting, you would save on average of $248 a month.

5.

Top 10 cities where renting is more economical than purchasing: Portland, OR

Top 10 cities where renting is more economical than purchasing: Portland, OR

Portland, OR. Zillow Break Even Horizon: 3.6 Years; Zillow Rental Index: $1,423; Annual Change in Zillow Rent Index: 8.6%

Portland has the most bike commuters in the U.S. Last year, 21.49% of homes sold were sold at a loss, but the average value of homes has risen 8.8% ($257,400).

6.

Top 10 cities where renting is more economical than purchasing: San Diego.

Top 10 cities where renting is more economical than purchasing: San Diego.

San Diego, CA. Zillow Break Even Horizon: 3.4 Years; Zillow Rental Index: $2,116; Annual Change in Zillow Rent Index: 2.9%

The average San Diego home value is up 11% making the average home $404,100.

Los Angeles, CA and San Jose, CA tied for 7th place based upon the number of years it would take to break even after purchasing a home in either location.

7.

Top 10 cities where renting is more economical than purchasing: Los Angeles.

Top 10 cities where renting is more economical than purchasing: Los Angeles.

Los Angeles, CA. Zillow Break Even Horizon: 3.3 Years; Zillow Rental Index: $2,311; Annual Change in Zillow Rent Index: 2.3%

Los Angeles has a very high unemployment rate and the home rates dropped about 35% which actually makes L.A. more affordable for home owners. The average home costs $399,800 which was up by 9.7% as of December 2012. If you put down a 20% payment of $80,000 with the 3.277 interest rate with a fixed 30 year mortgage, your monthly payment is going to be $1,863.

7.

Top 10 cities where renting is more economical than purchasing: San Jose, CA.

Top 10 cities where renting is more economical than purchasing: San Jose, CA.

San Jose, CA. Zillow Break Even Horizon: 3.3 Years; Zillow Rental Index: $2,513; Annual Change in Zillow Rent Index: 4.5%

San Jose, CA has a lot more people interested in purchasing homes since the average annual income is $92,500. San Jose has a very high employment rate with over 6,000 technology companies. The average home in San Jose is $544,600 so if you put down 20% ($109,000) + 3.277% + 30 years = $2,514 monthly mortgage payment which is $1 higher per month than the current rental index!

8.

Top 10 cities where renting is more economical than purchasing: Denver, CO.

Top 10 cities where renting is more economical than purchasing: Denver, CO.

Denver, CO. Zillow Break Even Horizon: 2.8 Years; Zillow Rental Index: $1,468; Annual Change in Zillow Rent Index: 9.3%

As of December 2012, Denver’s average home value was up by 14.1% with the average home costing $233,700.

9.

Top 10 cities where renting is more economical than purchasing: Austin, TX.

Top 10 cities where renting is more economical than purchasing: Austin, TX.

Austin, TX. Zillow Break Even Horizon: 2.7 Years; Zillow Rental Index: $1,516; Annual Change in Zillow Rent Index: 6.2%

At the end of last year, Austin had an overall home value increase of 4.7% = $209,900.

10.

Top 10 cities where renting is more economical than purchasing: Nashville, TN.

Top 10 cities where renting is more economical than purchasing: Nashville, TN.

Nashville, TN. Zillow Break Even Horizon: 2.6 Years; Zillow Rental Index: $1,190; Annual Change in Zillow Rent Index: 3.8%

The average home cost is now $140,000, which is up by 6%.

Most of the cities listed above experienced an overall increase last year in their median home values which is great news overall for the market!

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