Horace Greeley would probably be a little puzzled if he saw our data on buying and renting across America. That’s because if you’re looking to trade in your rental digs for a slice of that American Dream, we’re now telling you a new refrain: “Go east, young person!”
Yes, that’s right. Our data scientists crunched a lot of numbers to come up with the places where you can get the most bang for your buying buck, and where there’s a healthy supply of affordable housing. What they came up with is an eclectic mix of East, South, and Midwest markets—the Atlanta area topped the list of places where buying is almost certainly better than renting, according to our chief economist, Jonathan Smoke.
“Atlanta has always been more affordable, despite having seen very strong population growth for decades,” Smoke said. “There’s no natural barrier like an ocean or mountains or desert that limits development—so new construction has kept supply in balance with demand.
“Atlanta’s economy, which is more dependent on housing and new construction than other areas of the country, suffered more in the recent recession,” he added. “The market didn’t really start to recover substantially until last year. So it isn’t surprising to see it at the top of the list.”
Another plus for potential homeowners: Parts of Atlanta have older homes that create“fixer-upper” opportunities, and there’s also plenty of new homes, principally in outer areas.
Our data scientists used a variety of factors to calculate their findings. They looked at 2015 median incomes, median home values, and fair market rental data from the U.S. Department of Housing and Urban Development. They assumed current rates for a 30-year fixed-rate mortgage, that a buyer would have a 20% down payment, and that homeownership costs (mortgage, insurance, taxes) wouldn’t exceed 28% of the buyer’s income. Using all of those data points, the team was able to come up with a “maximum affordable price” for each market. Then it counted up the number of available homes in each market that fell under that “maximum affordable price” metric to see which markets boasted the most smart buys.
1. Atlanta-Sandy Springs-Roswell, GA
2. Chicago-Naperville-Elgin, IL-IN-WI
3. Philadelphia-Camden-Wilmington, PA-NJ-DE-MD
4. Detroit-Warren-Dearborn, MI
5. Tampa-St. Petersburg-Clearwater, FL
6. St. Louis, MO-IL
7. Pittsburgh, PA
8. Cincinnati, OH-KY-IN
9. Indianapolis-Carmel-Anderson, IN
10. Virginia Beach-Norfolk-Newport News, VA-NC
The West doesn’t do so well on this list, because those markets are generally more expensive, Smoke said. They saw higher price increases during the housing boom, in part because of population and household growth.
“Our top markets for buying generally didn’t see the kind of price appreciation in the [housing] boom that the true bubble markets saw—and many of them, such as Detroit, actually went through turbulent economic times” Smoke said.
On the other side of the coin, the team was able to identify markets where renters can find a great value. In all of these markets the economics make it cheaper to rent, although owning in these places is also affordable—except in Summit Park, UT, and Bismarck, N.D.
1. Los Alamos, NM
2. Columbus, NE
3. Summit Park, UT
4. Spirit Lake, IA
5. Kearney, NE
6. Bismarck, ND
7. Cedar Rapids, IA
8. Grand Island, NE
9. Des Moines-West Des Moines, IA
10. Madison, WI
Did you notice that none of the above markets are in the East, and none are big cities? In fact, the top five here are micropolitan markets, meaning they have fewer than 50,000 people.
(Note: We’re not telling you to pack up, sell your home, and switch to renting in one of these markets.)
“Renting is not a wise long-term financial choice if you intend to live in a market beyond a break-even amount of time and you can afford to buy,” Smoke said.
If you’ll be in a place long enough to break even with your homeownership costs—and if you can afford a mortgage—you should buy now.