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In Chicago, the math is simple – buying beats renting by a wide margin

by Peter Thomas Ricci

chicago-chicagoland-area-metro-skyline-homes-housing-market

The “buying versus renting” debate is one of the quintessential rumbles in American business circles, but a new Trulia study has made it clear – here in Chicagoland, buying beats renting by a wide margin.

For its analysis, Trulia compared the median home price in Chicagoland to the median rent, and when it broke down the relative monthly costs, it found that owning is 36.9 percent cheaper than renting. Even more, for renting to become more affordable than buying, one of two things would have to occur: either Chicagoland’s median price will have to jump by 65 percent, or mortgage rates will have to rise 181.4 percent.

Of course, Trulia’s research did make several assumptions, including: that buyers make a down payment of 20 percent on a 30-year mortgage; that they secure a 3.66 percent interest rate; that they itemize their tax deductions at the 25 percent bracket; that they stay in the home for seven years; and most notably, that they have the financial means to purchase a home in the first place, which is not the case for a shockingly large number of American households.

But if consumers are able to check off all those boxes, homeownership is far more financially advantageous than renting, and Trulia’s analysis certainly bears that out. See our chart below to see how Chicagoland compares with other metro areas:

Metro Area Median Home Price Median Rent Cheaper to Buy than Rent
Atlanta $172,119 $1,350 -45.0%
Boston $411,228 $2,400 -37.6%
Chicago $216,875 $1,750 -36.9%
Dallas $215,053 $1,650 -47.4%
Houston $176,513 $1,575 -52.9%
Los Angeles $536,351 $2,600 -32.7%
Miami $259,527 $2,000 -53.2%
New York $408,774 $2,350 -32.9%
Philadelphia $141,176 $1,300 -50.8%
Phoenix $224,528 $1,350 -38.5%
San Francisco $1,094,742 $4,300 -25.9%
Seattle $452,755 $2,300 -31.7%

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Comments

  • jack says:

    I would be interested to know if the location on the average rental was in close proximity to the average purchase price (same zipcode ?). in downtown Chicago, I do not find the same correlation between rent vs. purchase. if a 2 bedroom in an upscale apartment is 2200/month, the purchase of a 2 bedroom condo in the immediate area is closer to 800k PLUS monthly assessments. .

  • Thanks for your comment, Jack! And you do bring up a very valid point – in a market as large and multifaceted as Chicago’s, there will definitely be exceptions.

  • MM says:

    Key word being “Chicagoland” a huge area, most of which are suburbish areas that no one wants to move to.

  • Whitney says:

    Great information! I am so excited that I am finally getting into my first home in Chicago. I stumbled onto a new subdivision by D.R. Horton and I honestly couldn’t be happier! I am looking forward to owning and not renting!

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