The Salt Lake metro area has the nation’s fifth-highest gap between what it costs to rent versus buy a place to live, according to a new study released Wednesday.
With the Salt Lake area’s typical monthly rent of $1,680 compared to a typical monthly mortgage payment of $3,197, it’s 90.4% more expensive to buy rather than rent, the study by the personal finance website Bankrate found.
The places where renting looks like even more of a bargain than the Salt Lake area are all in the West: San Francisco, where the gap is a whopping 190.7%, tops the list, followed by San Jose at 185.6%, Seattle at 119.5% and Denver at 96.5%.
Not only is the rent-buy gap much higher in San Francisco than the Salt Lake area, so is the actual price of living there. The typical monthly rent in the Bay Area city is $3,055 and the typical monthly mortgage payment is $8,882.
Rents are down in both areas, however — 1.7% year over year in San Francisco and 2.4% in the Salt Lake area, according to Bankrate. At the same time, the size of mortgage payments were up, by 4.7% in San Francisco and 1.1% in the Salt Lake area.
In all of the 50 largest U.S. metro statistical areas analyzed, it was cheaper to rent than buy. And in nearly all, average mortgage payments that include homeowners insurance and property taxes were up over the past year while average rents either declined or stabilized.
But the gap was much less in other parts of the country, such as the Rust Belt. Detroit had the smallest rent-buy gap, at 2.3%; followed by Pittsburgh, 10.3%; Philadelphia, 11.5%; Cleveland, 13.2%; and Tampa, 20.9%.
“Millions of Americans continue to be priced out of homeownership today because of rising mortgage rates, home prices, property taxes and insurance rates, even as housing inventory shows signs of improvement," Bankrate analyst Alex Gailey said.
While the study shows renting is the most affordable housing option nationwide, at least in the short term, Gailey said the decision to rent rather than buy ends up being “heavily influenced” by location.
“Big city dwellers are better off renting than buying a home, particularly in pricey coastal metros. However, in cheaper areas of the country, it’s a lot easier to justify a home purchase right now,” she said, citing the lower rent-buy gap.
“The cost differences between renting and buying are much smaller,” Gailey said. “Homeowners may pay more upfront, but they also generate equity, hedge themselves against rent increases and otherwise enjoy the intangibles that come with homeownership.”