Buy or Rent in the Windy City?

Buy or Rent in the Windy City?

With soaring rent prices across the country, it leaves many to wonder if buying is the better option.

While it may be a surprise, the answer is yes – in fact, it’s cheaper anywhere in the U.S. depending

on how long you live somewhere. According to Trulia, buying a home is 37.7 percent cheaper than

renting on a national basis, which is a .5 percent increase from this same time last year.

Chicago, Illinois, is a perfect example of where it is cheaper to buy than rent. High priced rentals

are common in Chicago’s metro areas where residents appreciate the city’s walkability,

architecture, art scene, cuisine, and are willing to pay a premium for these luxuries. But, Chicago’s

suburban neighborhoods are growing in popularity as people move outside the city limits to

purchase homes at very affordable prices.

A recent study by Trulia examines the cost benefits of homeownership versus renting. The Rent

vs. Buy Report’s methodology assumes a buyer secures a 30-year fixed rate mortgage with a 20

percent down payment and lives in the home longer than seven years. However, using the Census’

2014 American Community Survey and a Trulia consumer poll, information suggests that the math

is slightly different for Millennials, who tend to move every five years or less and can only afford

a 10 percent down payment. Furthermore, Trulia also looked at where and by how much mortgage

rates and home prices would have to increase to erase the benefits of homeownership by reaching

its tipping point.

In Chicago, median home prices hold at $216,875 and the median rental rate is $1,750 per month.

However, if the median home prices rose to $357,844, the home buyer advantage reaches its

tipping point and vanishes. While, mortgage rates have dropped since last year, rising home prices

have consumed some of the financial benefits of lower mortgage rates. But, homebuyers fear not!

The professionals at Jameson Sotheby's will help you land the Chicago home of your dreams, and

for the right price. And right now, mortgage rates are on your side of the bargain.


Mortgage rates would need to rise 145 percent over today’s current rate of 3.7 percent, and home

prices would have to go up significantly for Chicago’s real estate market to reach that tipping

point. This scenario is extremely unlikely to happen anytime soon, considering the Federal Open

Market Committee (FOMC) has only raised rates once over the past ten years. Furthermore, home

prices would have to grow to their tipping point with minimal change to rental rates for this

scenario to unfold. For an expert’s detailed opinion, consult with Ron Goldstein at

ron@chicagoluxuryrealty.com

While buying is always cheaper in the long run, there are still markets that offer competitive

prices. To show how each metro varies, Trulia grouped metros into three different categories:

where home buying beats renting by the largest margin, the slimmest margin, and metros on the

tipping point. Miami, FL, takes the top spot on this list where home buying beats renting by the

largest margin, while Honolulu, HI, has the slimmest financial advantage of homeownership. The

range between the two metro cities is 53.2percent cheaper to buy than rent in Miami, compared to

17.4 percent in Honolulu. Conversely, Chicago, IL, falls right in the middle of these two ranges at

36.9 percent.

Therefore, if a buyer is able to put a 20 percent down payment on a home and live in the home for

more than seven years, then home ownership is the way to go. With the information at hand, it

truly is less expensive to buy a home compared to renting a home in many of America’s largest

metro cities, including Chicago.

By Tara Scott-Johnson