One of the biggest questions people have when moving to a new city is whether they should rent or buy their new place. While you may get tired of dealing with a landlord and feel like you’re “throwing your money away” on rent, renting can actually be the smarter financial choice in many cities around the country. Whether there’s a booming economy in your town or its overall housing inventory is low, the conventional wisdom of investing in a home to save money on monthly housing expenses doesn’t always apply everywhere.
Many factors go into the decision of whether or not to buy a home, including how long you plan on living in a particular community, what your debt-to-income ratio is, how much of a down payment you’ve saved up, and what your credit score looks like — but sometimes it also comes down to a simple calculation of dollars and cents.
The goods news is that there are many tools available online to help you figure out what makes more financial sense for you, such as Nerd Wallet’s Rent vs Buy Calculator. Alternatively, you can ask a lender or a real estate agent to crunch your real-life numbers to see if buying in your area is a realistic option.
In these six cities, however, it looks like renting is definitely the way to go for the average person.
San Francisco, CA
Median rent: $4,500
Median list price: $1.295 million
San Francisco is notoriously one of the most expensive places in the country to do anything, whether it be renting, buying, eating, drinking, or sightseeing. But it turns out it’s actually much cheaper to rent here than is to buy. Even with a down payment of $45,000, unless you plan to stay in your home for at least 17 years (the break-even point), you’ll be better off renting.
Santa Barbara, CA
Median rent: $4,225
Median list price: $1.295 million
Santa Barbara is a small, sleepy, and beautiful beach town tucked away on the central coast, located about midway between Los Angeles and San Francisco. Because of its close proximity to the oceans and mountains and overall low housing inventory, living in this slice of paradise can be pretty expensive. With a down payment of $45,000, it would still take 14 years for buying to make more financial sense than renting.
Median rent: $3,400
Median list price: $1.699 million
If you want to be in the center of it all, you usually move to Manhattan. Unfortunately, the housing prices here about as high as the Empire State building. And even though the rents in Manhattan are astronomical, and much higher than they are in the vast majority of the country, it will never be any less expensive to buy than to rent here.
Median rent: $3,125
Median list price: $688,888
Oakland has undergone quite the transformation in the last decade. As more renters get pushed further and further out of San Francisco, the city has become a slightly less expensive alternative for those who live in the Bay Area. Unfortunately, it’s still very expensive to live there, whether you’re buying or renting. Though the break-even point between the two comes sooner than SF’s (only five years on average as opposed to San Francisco’s 17), it’s still much cheaper to rent than it is to buy in Oakland.
Median rent: $2,500
Median list price: $617,000
Arlington, Virginia is just a quick drive or metro ride away from the Capitol, which makes it a very popular suburb for those who work in Washington. Unfortunately, that convenience comes with a big price tag. The median list price for homes in Arlington is much less than the likes of New York City or San Francisco, but it still makes much more financial sense to rent than to buy here. Even with a $20,000 down payment, it will take you about five years to hit that break-even point between renting and buying.
Median rent: $2,200
Median list price: $599,540
If you enjoy warm temperatures and access to golf courses and resort spas all year round, Scottsdale may be just the right place for you. As always, this beauty and warmth bears a relatively hefty price. Even with a $20,000 down payment, you’ll be about seven years into a mortgage here before buying starts to seem cheaper than renting.