5 Markets Where It Makes Cents to Buy

If you’re feeling squeezed out of homeownership, you’re not alone. More people have felt the housing affordability crunch and feel their only option is renting. Recent data shows that 34% of households in the United States live in rental housing, whether an apartment, condo, or single-family home.

Yet, not every market has housing costs so sky-high they are pushing people to rent. In some housing markets, it makes more “cents” to buy. Let’s look at these markets and find out why that’s the case.

Where to Find the Affordable Homes

Many would be happy to stop renting and start buying if they thought it was affordable. Still, many real estate markets are stressed to meet local housing demands.

Add to that how mortgage rates have doubled from 2022 to 2023. Even small increases throw a wrench in an average American’s ability to achieve homeownership. Even if home prices were stable, the monthly cost of the mortgage has gotten so much higher that even middle-range income families find their buying power has declined. An interest rate increase from 4.5% to 6.75% on a $300,000 loan adds $425 monthly on a 30-year fixed-rate mortgage.

Thankfully, not all places are made alike. That’s especially true in real estate, where location is everything. National Mortgage News says those looking for homeownership opportunities can still find them in the Rust Belt markets, which include Milwaukee, Chicago, Detroit, Cleveland, and Pittsburgh. There, notes National Mortgage News, average mortgage payments come in well below the national average of $2,000. And in some cases, they may be far lower, with some mortgages costing only $1,000 per month.

A few years back, interest rates were low enough that monthly mortgage payments of $1,000 were a fairly common sight in many of these areas. Since then, rising interest rates have also sent mortgage payments moving up. But while the rising tide is lifting all the boats, the Rust Belt hasn’t been as sensitive to these issues.

National Mortgage News also listed specific locations where homes are more affordable. Renting might not make as much sense in these places as owning outright.

Cities Where You Can Find Affordable Homes

It’s not just about how low the home prices are but how low they are relative to the average rent cost. The analysis looked at how much a starter home would cost each month compared to median rental prices for similarly sized properties. They included a 7% interest rate, local property taxes, insurance, and homeowner association fees. Some of the cities they highlighted as being better to buy than rent:

Memphis, TN

With a median monthly rent of $1,258 versus a median monthly mortgage payment for home buyers of $847, it’s a slam dunk to buy here. If you’re tired of renting in Memphis, there may be a better place to live that you can call your own.

Birmingham, AL

You can save $270 by buying a home over renting in Birmingham. This, of course, is the average. The monthly median mortgage payment for home buyers was $879, while the monthly rent median was $1,149. Alabama also has one of the nation’s lowest property tax rates, so you have that to consider, too.

Pittsburgh, PA

As you might expect from a bigger city, rents are higher in Pittsburgh, but they’re not that much higher than others on the list. Median monthly rent clocks in at $1,445. Meanwhile, buyers’ median monthly mortgage cost is lower, at about $1,097, a 24.1% difference. Pittsburgh is one of the chief cities in the Rust Belt, where renting is clearly a more expensive option than buying in many cases.

Cuyahoga, OH

Another Midwestern city with serious buying potential, this Cleveland suburb is one where a median home sales price of $173,469 makes home-buying more affordable than renting. The average rent cost was $1,300 in January 2023.

What are the costs of renting vs. home ownership?

The main argument for owning a home instead of renting is that renting is “throwing away money.” The logic is simple. A person has to pay housing costs to keep a roof over their head no matter what they do. When renting, that money goes to the landlord or property manager. But with owning, the borrower keeps some of that money in the form of growing home equity.

True, there are additional costs like repairs, mortgage interest, and property taxes. But assuming all things are equal, including the amount of monthly payments, home ownership returns some of that value in the form of equity on the home, which can be realized when you later sell.

That should theoretically make the equation easy. Even if you have to pay a little more each month, the return on home equity is almost like a forced savings plan. You’re already spending that money, so that money might as well go towards value you can retain for the long term.

Not so fast, writes Ramit Sethi of I Will Teach You To Be Rich. “I spent $30 on dinner in NYC,” Tweeted Sethi. “Great food, great service, and I plan to go back in the future. Did I ‘throw my money away’ on dinner?”

He believes renting is sometimes a good thing for an individual’s situation. But for some people, especially those living in one of the areas we described, buying may make more financial sense. It’s only when median rent prices are far lower, as in some cases, that it might make more sense to rent for a while and stock money away for a down payment on a home.

Does It Make “Cents” to Buy ASAP?

Homeownership has gotten more expensive lately, and rental prices have followed pace. Still, across the Rust Belt and in select areas in the South, buying a home can be significantly cheaper than renting.