Which are the best places to buy a home in the US?

Owning a house beats renting one in several key ways, as common belief dictates, starting with the fact that if you’re a homeowner, you pay down your own mortgage rather than someone else’s.

However, home ownership feels out of reach for many of us in 2023 due to a historic alignment of high sales prices and high mortgage rates.

Surprisingly, real estate analysts can still point to several large US cities where owning a house remains cheaper than renting.

But let’s get one thing straight first: you won’t find New York or San Francisco on this list. Cities like these two are places where home ownership comes at a hefty price. Instead, you’ll see cities where the home prices are low enough even during these days, as the average monthly mortgage payment there is lower than the typical monthly rent there.

According to a recent report that took a look at the 50 largest metropolitan areas, experts identified the best places to buy a home rather than rent one. There are only four of this kind. A second team of experts did a similar analysis and came up with five other US cities where owning is cheaper than renting.

As Danielle Hale, a financial analyst, pointed out, “The housing market is challenging.” One big reason is mortgage rates. For example, according to federal data, the average rate for a 30-year fixed mortgage is currently 6.7%, after years of historically low rates. Rates had stayed below 5% for most of the last decade.

But how much does it cost to buy yourself a house in 2023?

Though house prices have gone down in response to rising rates, they still remain high. More specifically, the median sales price significantly increased from $322,600 in early 2020 to $479,500 in the last months of 2022 before falling to $436,800 this year.

According to financial experts, another reason the housing market is still tight is that there aren’t enough houses being built. In other words, our world hasn’t kept pace with the households that are forming. But this doesn’t mean that if you’re looking for the best places to buy a home in the US, you won’t find them.

As a result, the national housing shortage makes it hard to decide whether you want to buy or rent. There aren’t many great deals in the rental market. For instance, the median asking rent exceeded $2,000 for the first time in 2022. However, you can still find some best places to buy a home.

According to the latest data, the figure now stands at $1,995. Moreover, financial experts expect rents to go down later this year, saying things are pointing in the right direction.

Daryl Fairweather, a financial expert, sees some relief ahead for those looking to buy a house, too, but maybe not until next year. She believes that mortgage rates will come back down as inflation, which is driving the ship right now, seems to be abating. Yet, this doesn’t mean one can’t take a look at a couple of the best places to buy a home.

Fairweather predicts interest rates will come back to about 5% by the end of 2024, which should be enough to boost the housing market.

While this article aims to show you some of the best places to buy a home in the US, you should know that these are actually pretty rare. You don’t really get to find too many cities where buying a house is cheaper than renting one.

The dizzying math of high purchase prices and high interest rates makes owning much costlier than paying rent in most large US cities. Let’s take Austin, Texas, as an example, which is a pretty extreme one. Even a starter home will cost you around $3,700 per month, according to some recent data. Monthly rents there are around $1,650 on average.

The best places to buy a home in the US in 2023 are located in smaller metro areas. These cities tend to have a smaller rental stock and a higher ownership rate. Most of them are inland cities, with real estate markets that didn’t experience the huge increase that you tend to see in many coastal markets, which can make homebuying almost impossible.

So, which are the best places to buy a home in the US? Without further ado, here’s where owning is cheaper than renting!

1. Memphis, Tenn.

Memphis is one of the best places to buy a home in the US. In fact, homebuyers in this city can save hundreds of dollars every month over renters. According to financial experts, this applies even with sale prices surging.

In Memphis, the median monthly cost for first-time homebuyers is only $847. On the other hand, the median monthly rent is $1,258. That’s almost $400 more, which is a lot.

Joe Spake is a broker in Memphis, and according to him, new apartments in Memphis rent for a hefty amount of money. If you’re looking for a new place to rent, expect to pay $1,600 in monthly rent for a two-bedroom apartment.

2. Pittsburgh

Pittsburg is also among the best places to buy a home. Home seekers will save about $350 per month by buying a starter house in this city rather than renting one, according to financial analysts. The median monthly rent is $1,445, while a mortgage is about $1,097.

This city in the Rust Belt experienced substantial outmigration after the steel industry went back in the late 20th century, which resulted in overall real estate stagnation. However, unlike some other urban metro areas, this one has seen a revitalization and gentrification of its downtown.

So now Pittsburgh is one of the best places to buy a home in the US.

3. Philadelphia

Philadelphia also makes the list of the best places to buy a home in the US. According to the latest data, owning a house in Philly costs 7% less, on average, than renting one. Monthly rents average approximately $2,000 here, while monthly mortgage costs average $1,869.

4. Cleveland

Next on the best places to buy a home, we have Cleveland. Owning a house here is 4% cheaper than renting one, per the latest data. The median rent is $1,800, while the median mortgage cost is $1,730.

5. Birmingham, Ala.

Alabama’s largest metropolitan core remains affordable for those looking to buy a house here, even in a tough market. Monthly costs for a starter home don’t go beyond $900, while rental costs average about $1,150 per month.

6. St. Louis

A starter home currently costs 34% more in St. Louis than just 12 months ago, according to the latest data. Still, mortgage payments are still cheaper than renting, making this city one of the best places to buy a home in the US. Monthly costs for homebuyers are on average $1,128 in St. Louis, compared to $1,211 in monthly rents.

7. Houston

Next on the best places to buy a home, we have Houston. While there isn’t a big difference between owning a house and renting one in America’s fourth-largest city when it comes to money, every amount saved is welcome these days.

Median mortgage costs and rents both fall in the $2,300–$2,400 range in Houston, with house ownership being 1% cheaper than renting.

8. Baltimore

Baltimore, too, is more affordable for buyers than renters by only 1%. It pencils out to a monthly savings of about $65 on average. Jason Lerner, a financial expert and vice president at George Mason Mortgage in Baltimore, told us he had lots of potential buyers leave the market. However, as demand goes down, sellers are more willing to negotiate and lower prices.

9. Detroit

Detroit is the last city on the list of the best places to buy a home in the US. The Motor City provides the nation’s best relative value for those seeking to own rather than rent, per the latest data.

Purchasing a house in Detroit is 24% cheaper than renting. That’s a lot! Monthly rents run about $1,700, while a monthly mortgage costs around $1,300 on average.

For anyone deciding whether to buy or rent, a lot depends on how long they plan to stay put. Homeownership builds home equity, as financial experts point out. However, a buyer who sells after only a year or two won’t build much of it.

As a rule of thumb, a homebuyer should plan to remain in the dwelling for at least five years, experts say. According to them, five years is long enough to ensure that if you do have to sell, your equity will cover your real estate fees. By the way, if you’re about to buy your own house for the first time, this book guide may give you the tips and tricks you need for the buying journey.

If you liked our article on the best places to buy a home, you may also want to read 7 Charming Places Where Retirees Can Live On A Tight Budget.