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'Renting is considerably cheaper than homeownership,' says economist: Here's where renters can save the most money

"Home prices have been rising considerably faster than rent costs are."

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Renting may be cheaper than buying right now

Traditionally, buying a home instead of a renting one has often been considered the better option because you're building equity. But as of late, as the pandemic has transformed the U.S. housing market, renting is coming out on top for those looking for no-stress monthly payments. According to a recent LendingTree study, costs related to renting were lower than those of homebuyers with a mortgage.

"Across all of the nation's 50 largest metropolitan areas, renting is considerably cheaper than homeownership until you've paid your mortgage off," says Jacob Channel, chief economist at LendingTree. "Often, home prices and rent prices rise together. Although lately what we've been seeing is that home prices have been rising considerably faster than rent costs are."

3 cities where you can save the most renting instead of buying

On average, the monthly cost of renting is more than $600 cheaper than buying, LendingTree found. In some cities, the difference is more than $1,000.

New York City

  • Median monthly gross rent: $1,439
  • Median monthly housing costs for homes with a mortgage: $2,802
  • Difference: $1,363

San Francisco

  • Median monthly gross rent: $1,905
  • Median monthly housing costs for homes with a mortgage: $3,088
  • Difference: $1,183

San Jose, California

  • Median monthly gross rent: $2,249
  • Median monthly housing costs for homes with a mortgage: $3,347
  • Difference: $1,098
Contractors work on a home under construction in Sumter, South Carolina, U.S., on Tuesday, July 6, 2021.
Bloomberg | Bloomberg | Getty Images

3 cities where you can save the least renting instead of buying

Orlando, Florida

  • Median monthly gross rent: $1,210
  • Median monthly housing costs for homes with a mortgage: $1,508
  • Difference: $298

Tampa, Florida

  • Median monthly gross rent: $1,115
  • Median monthly housing costs for homes with a mortgage: $1,458
  • Difference: $343

Indianapolis

  • Median monthly gross rent: $916
  • Median monthly housing costs for homes with a mortgage: $1,280
  • Difference: $364

The right housing choice depends on 'your individual financial profile'

While there are some signs that the market is cooling, including more new listings and slower sales, it's still smart to think about the most cost-effective housing option for you. "It's not necessarily that one option is always better or worse than the other," Channel says. "It will ultimately always come down to your individual financial profile."

There are pros and cons to both renting and buying, and different factors will play into your decision, says Nicole Bachaud, economic data analyst at Zillow: "How long are you going to be in a home? How fast do we anticipate appreciation going in the future? Are you going to turn around and sell it really quickly, or are you going to keep it for a long time?"

It's smart to carefully consider your options rather than make a rash decision, says Kaya Ladejobi, a certified financial planner and the founder of Earn Into Wealth. "If you're not in a rush, you might consider waiting until the market gets a little bit more kind of sane, before you decide."

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