Cheaper to rent or buy? San Francisco had the widest dollar difference in the U.S.
San Francisco skyline, with the City Hall rotunda visible, in San Francisco, California on June 27, 2023. (Photo by Philip Pacheco / AFP) (Photo by PHILIP PACHECO/AFP via Getty Images)
SAN FRANCISCO - A new analysis on the cost of renting a home versus owning a home with a mortgage found renting is cheaper, with San Francisco coming in at the top with the widest dollar margin.
By the numbers:
The review by online lending marketplace LendingTree found the difference in costs between renting and owning in San Francisco to be $1,414 a month.
That's based on a median monthly gross rent of $2,397 compared to the median monthly mortgage costs of $3,811 in 2023.
San Jose also had among the widest dollar difference in the monthly costs of renting versus owning your home, coming in fourth place.
The Bay Area’s most populated city has a median rent of $2,773, with the median monthly mortgage hitting at least $4,000, bringing the difference in costs to $1,227.
SEE ALSO: Bay Area suburbs see big rent increases
Dig deeper:
The other top metro areas with the greatest dollar difference between renting and owning were Bridgeport, Connecticut at number two with a difference of $1,367.
New York followed with its median rent of $1,764, bringing the difference to $1,340.
Nationally, the difference between median gross rent, which stood at $1,406, and the median mortgage housing costs was $498 a month, LendingTree findings show.
Percentage difference
San Francisco also ranked high when looking at the percentage difference between renting and owning. It came in 10th place with a 59% difference.
San Jose ranked 35th highest with a percentage difference of about 44%.
To rent or buy?
When deciding whether to rent or buy, experts said some financial considerations to take are whether you can afford a loan at the current mortgage rate as well as whether you have the money for the down payment.
Other factors that should weigh in are your lifestyle and future plans.
"If you don’t plan to stay in an area long term or want the freedom to pick up and move for a new job or change of pace, you may be better off renting," LendingTree researchers said.
They noted that people should also think about whether they want to deal with the work it takes to maintain a home.
"Buying a home involves more than the mortgage payment. If you don’t want to be saddled with covering maintenance and repairs, renting will put that responsibility on your landlord’s shoulders," LendingTree said.
On the other side, factors to consider when deciding whether to purchase a home include whether you’re seeking more freedom over how you use your space versus adhering to a landlord's rules.
Benefits to buying also include owning property as an investment for your future.
"Unlike renters, homeowners can build home equity by making their mortgage payments and may be able to sell their homes for a profit at some point," experts said.
The biggest consideration is whether you are financially secure to carry a mortgage.
"While many perks can come with being a homeowner, they’re unlikely to matter to someone struggling with their finances and facing default on their mortgage," experts noted. "You should only consider buying a home if you’re reasonably sure you can afford it."
LendingTree used data from the U.S. Census Bureau to compare monthly rent and housing costs for homes with a mortgage in the 100 largest U.S. metros.
In every comparison, the median rent costs were lower than median mortgage housing costs.
Real Estate Market Trends
Redfin reports that home prices in the Bay area rose 4% in January, from January of last year. The median sale price here in the Bay area is close to $1 million, according to the National Association of Realtors. Pending sales dropped 4.6%, the lowest level since the organization started tracking that metric in the early 2000. Let's get some good insight by turning, as we often do, to realtor Deidre Joyner of Red Oak Realty.