This is a guest blog post by Jennifer Riner, Trulia.com.
In today’s rental market, where leasing is largely unaffordable in many major metros, it’s not rare for 20- and early 30-somethings to consider buying a home at an earlier age. In fact, according to statistics compiled by Trulia in October 2015, homeownership is 23 percent cheaper than renting for millennials across the nation.
Pulling data from a recent Trulia poll as well as the 2014 American Community Survey, Trulia highlights two housing preferences unique to younger buyers (defined as ages 25-34), which are that young buyers typically want to move every five years and can only afford a 10 percent down payment. Taking these preferences into account and assuming younger buyers qualify for a 3.85 percent, 30-year fixed rate mortgage and fall within a 25 percent tax bracket, our data shows that buying is actually cheaper than renting in 98 out of 100 of the nation’s top 100 markets, two of which fall in Texas.
Houston topped the list of U.S. metros where buying beats renting, with a median home price of $162,784 as of Sept. 2015. Conversely, the median rent hit $1,550, which makes the cost of buying in Houston versus renting 46 percent cheaper, assuming millennials live in the city for five years and put down less than 10 percent of their home purchase – which in this case, would equate to about $16,300.
To determine whether Houston is a good fit in terms of lifestyle, consider the demographics in the area. Houston has a median household income of $44,421, with 31 percent of residents stating single status. The median age is 33 years old and 57 percent of Houstonians are homeowners.
San Antonio took the number 10 spot for best buying over renting markets in the country with a Sept. 2015 median home price of $141,907 and median rent of $1,295. It’s 42 percent cheaper for young residents living in San Antonio to buy over rent, making the same assumptions regarding down payment and span of homeownership as above.
Most of San Antonio’s residents are homeowners – 65 percent, to be exact. The median age in San Antonio is 34 and the median household income is $42,431. And, 29 percent of San Antonio residents are single.
While Austin didn’t make the list for best markets to buy over rent in the U.S., the city is worth mentioning due to growth factors not outlined in the Trulia study, including a booming job market which is helping shape a higher median income. However, the price of real estate in Austin is high; the average list price of homes on Trulia.com is $662,557 and the median rent is $1,850 per month.
Austin offers a variety of attractions and neighborhoods that draw different personalities. Overall, 42 percent of residents are single with a median age of 34 years old across the city. Austin is comprised of 53 percent homeowners and the median household income is $55,944 per year.
Making the move to Texas is the right start for many millennials, with no state income tax and a warmer climate compared to Northern and Midwestern states, but selecting a specific locale depends fundamentally on your personal budget and lifestyle preferences.
On the House blog posts are meant to provide general information on various housing-related issues, research and programs. We are not liable for any errors or inaccuracies in the information provided by blog sources. Furthermore, this blog is not legal advice and should not be used as a substitute for legal advice from a licensed professional attorney.