In most states, it’s cheaper on a monthly basis to own a home than to rent one. And that makes sense: With mortgage rates low and looking as if they will remain that way in the near future, monthly mortgage payments are often cheaper than monthly rent payments.
A new report from GoBankingRates.com looked at the cost of renting vs. buying a single-family home in every state and the District to determine which is cheaper. The report concluded that it’s cheaper to rent than buy in only D.C. and these eight states: Colorado, Delaware, Hawaii, Idaho, Montana, Oregon, Utah and Wyoming.
Of course, the biggest caveat in this report is that D.C. is not a state, but a city with no real suburban or rural areas. But still, the report speaks to just how expensive home prices have become in the District, even when compared with the city’s high rent prices.
The study figured that the monthly median rent in the District is $2,575 and the monthly median mortgage payment is $2,719.
“Even though it’s cheaper to rent instead of buy in the nation’s capital, the National Association of Realtors identified Washington, D.C., as one of the top markets for aspiring millennials who want to buy a house,” GoBankingRates.com wrote about the city. “That’s because millennials’ higher income levels are making it easier to afford a home.
To find the monthly mortgage payments, the report assumed a person put 20 percent down on a 30-year fixed loan. It also took insurance and taxes into account to determine the monthly payments.
The mortgage payments, of course, could vary depending on whether a buyer puts a down payment different from 20 percent. And, as MarketWatch notes, the report does not account for maintenance costs that a homeowner is responsible for and that a renter is not. It also does not consider closing costs, the opportunity cost of using money as a down payment and how long someone would need to own a home for ownership to be the best financial decision in the long run.
Take a look at the full report to see how the District stacks up against other places.