The monthly cost of homeownership may be more attainable than people think, according to a new report from real estate firm Zillow (Nasdaq: Z and ZG).
But, it depends on where they live, the report from real estate company Zillow has revealed.
According to a new Zillow Home Loans analysis, a monthly mortgage payment is “actually less expensive than rent in 22 of the 50 largest U.S. metros.”
Recent dips in mortgage rates, which have fallen “to the lowest level since early 2023, have significantly reduced monthly payments.”
Mortgage payments for home buyers are “lower than monthly rent costs in 22 of the 50 largest U.S. metros, when using a 20% down payment,” according to insights and research from Zillow Home Loans.
New Orleans, Chicago and Pittsburgh offer “the greatest savings when comparing the cost of rent to a mortgage payment, before taxes and insurance, and assuming a buyer can put 20% down. For those who can put together a down payment, buying a home in these cities may be the right move.”
In Chicago, the typical rent payment “is $2,074 per month, but a monthly mortgage payment2 is $1,640 — a savings of $434 a month by owning rather than renting.”
In New Orleans, homeowners can also save “nearly $450 a month paying a mortgage rather than renting, and in Pittsburgh, the savings are about $320 a month.”
These savings are even more surprising when “considering that homes for sale tend to be larger than the typical rental.”
This trend also holds true across the U.S.
The typical rent payment nationally “is $2,063 a month, but the typical mortgage payment is $1,827 — a savings of $236 a month by owning rather than renting.”
Zillow Home Loans Senior Economist Orphe Divounguy believes that home ownership is more within reach than renters think.
“With mortgage rates dropping, it’s a great time to see how your affordability has changed and if it makes more sense to buy than rent.”
Beyond monthly rent or mortgage payments, there are “additional costs for both renting and homeownership that must be considered.”
Homeowners pay taxes, insurance, and utilities “on a monthly basis, and should be prepared for ongoing maintenance costs.”
Renters also typically need insurance, and will “often pay extra for parking, pets, and utilities.”
There are pros and cons to both buying and renting, “but generally, the longer you plan to stay in your house, the more financial sense it makes to buy.”
Mortgage payments can decrease over time “by paying off private mortgage insurance or refinancing your loan at a lower rate, whereas rent payments have the potential to increase at each lease renewal.”
Beyond that, mortgage payments build homeowners’ equity “in their house — increasing their financial stake in their home as time passes.”
Rent growth has come down from pandemic-era highs and returned to long-run norms, but prices are still climbing.
The typical rent is 3.4% more “expensive than a year ago and nearly 34% more expensive than before the pandemic.”
The for-sale market, on the other hand, is offering “opportunities for buyers heading into the fall, with more than 1 in 4 sellers cutting prices.”
With inventory up 22% compared to a year ago, buyers are “gaining bargaining power.”