According to real estate finance experts, many Americans are still priced from homeownership due to high interest rates and increased housing costs.
Only five cities have been discovered offering cheap rates for purchasing Grand Rapids, Michigan. Pittsburgh, Pennsylvania. Lakeland, Florida. Philadelphia, PA. Miami, Florida.
“Unfortunately, high interest rates and escalating housing costs have priced many Americans out of home ownership,” Homeabroad founder and CEO Amresh Singh told the Epoch Times.
“New developments tend to be more expensive and are out of reach for many people.”
Singh said everything comes down to the “rental” ratio.
“You need to determine the amount of mortgage payments and taxes and compare it to the costs of similar properties on your rental,” he said. “If you pay a similar amount for rent, it makes more sense to buy. But if your mortgage payments and taxes are much higher than your rental, lease is a better option.”
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A small buyout ratio means that home ownership is a more viable choice, but a higher buyout ratio makes renting a better choice.
Singh also advocates the “five year” rule.
“If you’re planning on staying at home within just five years, rentals may make more sense as you may need more time to build fairness in your home,” he said. “On the other hand, if you’re planning on spending five or ten years at home, it’s a way to buy because you can use that time to live in investments and build wealth.”
Other factors to consider are property location, historical assessment, population, local employment growth, and quality of life provided. “It’s all about the potential appreciation of the home,” he said.
Another consideration with your purchase is that you can create the 20% down payment that you normally need.
“If you can’t cut 20%, you may need to pay additional costs for your personal mortgage insurance, which will be added to your monthly mortgage payment,” Singh pointed out.
Five cities to buy will get rentals
Grand Rapids is named America’s cheapest place to buy a home compared to renting, with a cost difference of just 1%. Research shows that Grand Rapids’ average monthly mortgage payments are $1,773, compared to the average monthly $1,752. Buying a home could be a better financial option than renting, as the median home price is only $261,255, and the cost of living is 5.5% lower than the average US community.
The job market is booming, especially in the healthcare industry, with the city offering a wealth of family recreation, from Lake Michigan beaches to over 75 parks and natural trails. For adults, there are many art galleries, museums, music venues and restaurants.
Pittsburgh’s buying ratio is 11%. Monthly mortgage payments average $1,164 and average rents of $1,453. The median home price is $229,000, and with a cost of living 8.2% lower than the average US community, Pittsburgh was listed as the second most affordable price to buy a home.
Lynn Bingham, leader of Pittsburgh’s Howard Hannah Collier’s Bingham team, was not surprised that “Steel City” was ranked highly as one of the best places to buy rental properties.
“We have seen the influx of people into cities and suburban areas due to the growth of the technology and the healthcare industry,” she told The Epoch Times.
Companies like PayPal, Uber and Google are moving to areas that create more jobs and attract more people. “This includes young doctors in Boston and Connecticut, as well as young people in New York, Washington and even Texas,” Bingham said.
She said housing is more affordable than many other American cities, but property taxes tend to be on the higher side. “Of course they may still be a bargain for people from New York and other parts of the Northeast.”
Pittsburgh is considered a medium-sized city with a population of over 300,000. It is the second most populous city in Pennsylvania, with over 2.4 million people across the Pittsburgh metropolitan area.
Bingham noted that several sections of downtown Pittsburgh have undergone full renovations, with several new, luxurious townhomes in the Strip district winning as much as $1.2 million. “It’s a great walkable area and we actually had a lot of seniors downsized from larger suburban homes and moved into the area,” she said.
Lakeland and Philadelphia ranked third and fourth respectively, with a 15% buy-out ratio. The median home price in Lakeland is $340,000 and $350,000 in Philadelphia.
Miami has been receiving continuous attention as one of the most expensive regions in the country, but its buyback ratio is quite low at 18%. The average monthly mortgage payment is $3,223 and the average rent is $2,721. The current median home price is $515,000.
The most expensive area to buy
Conversely, some of the most expensive areas to buy are in the West and Midwest. San Jose, California ranks as the most expensive city in the US for buying a home compared to renting. At a 131% buy ratio, the average monthly mortgage payment is $7,558 compared to the average rental of $3,268. The median home prices in San Jose are listed at $1.3 million. The city’s cost of living is 131% higher than the US average.
Los Angeles is the second most expensive region in the country with a rental ratio of 118%. The median home price of $1.1 million means that the average monthly mortgage payment is $6,499, compared to the average monthly rental cost of $2,984. The cost of living in Los Angeles is 61.7% higher than in other countries.
Although located in the heart of the Midwest, Omaha, Nebraska, has a 117% rental ratio, which makes it much cheaper than buying it. The average monthly rent is $1,362 and monthly mortgage payments are $2,962. The median home price in Omaha is $392,450.
The rent-to-acquisition ratios in Austin, Texas and Des Moines, Iowa, were both over 100%. The average rent in Austin is $1,688, but mortgage costs are usually above $3,600 a month. In Des Moines, monthly rent averages $1,270 compared to a $2,584 mortgage payment.
There are more manageable cost differences in some parts of the country between renting and purchasing, including Columbia, South Carolina. Tampa, Florida; Palm Bay, Florida. In these areas, deciding whether to rent or buy can be a more difficult choice, Singh said.
Singh said the decision to buy rent should consider estimated home repair costs, monthly additional payments such as home insurance and homeowners association fees, and whether buyers can maintain adequate savings after making a 20% down payment and covering the closing costs.
“If any of these areas presents a challenge, rentals could offer a better option,” he said.
