A for sale sign featuring 100 percent financing is shown outside a home in Spring. Buying a home is actually cheaper than renting in the Houston metro, a new analysis from Redfin shows.
Good news, prospective homebuyers: Houston is one of only four major real estate markets in the country in which it’s cheaper to buy a home than it is to rent one, according to a new analysis.
COST OF LIVING: 3 Houston metro counties among Texas’ 10 most expensive, analysis shows
Real estate website Redfin has found for homes in Houston and just three other major metropolitan areas, the typical monthly mortgage expense is slightly lower than its estimated monthly rental cost. The other major cities experiencing the phenomenon are Detroit, Philadelphia and Cleveland.
Nationwide, the typical home costs 25 percent more to buy than rent, but in Houston, it is 1 percent less expensive. Redfin’s analysis concluded this is because home values in Houston and the other three metros have stagnated relative to the country as a whole.
The report analyzed single-family homes, condos/co-ops and townhouses in the 50 most populous U.S. metros to determine the monthly housing payment, assuming March’s average interest rate of 6.5 percent, with 5 percent down, a homeowner’s insurance rate equal to 0.5 percent of the purchase price, and 1.25 percent annual property-tax rate (if no tax records were available) and then compared the price with the what the property would be expected to rent for.
Of Houston’s properties, 52 percent have been cheaper to buy than rent.
Despite the findings, Houston has become more renter-dominated in recent years, according to a report from Rice University’s Kinder Institute for Urban Research. That could be because buying isn’t feasible for everyone, including those who are unable to come up with a down payment, said Redfin Deputy Chief Economist Taylor Marr, according to a news release.
In the rest of the country, mortgage rates would need to fall significantly for owning to become cheaper than renting, the report showed. Austin’s pandemic popularity took it from a relatively affordable city to one in which only 5 percent of homes are cheaper to buy than rent.
Sonia Garcia is an engagement reporter for the Houston Chronicle.