United Guaranty Insights United Guaranty Insights

Buy vs. Rent Equation Differs for Millennials
JoAnne Skerritt
By JoAnne Skerritt, Regional Vice President
United Guaranty Corporation
Posted on November 10, 2015

Generally, it's cheaper to buy a home rather than pay rent.

That's also true for millennials, but to a lesser degree, according to a recent study by Trulia, an online listing service for home sales and rentals.

Historically, Trulia's Rent vs. Buy report has assumed a 20 percent down payment and a sale within seven years. In that equation, buying is 38 percent cheaper than renting, nationally.

With its new equation for millennials (ages 25–34), Trulia factored in a lower down payment—10 percent—and an ownership period of five years rather than seven years. In that scenario, buying is 23 percent cheaper than renting on a national basis.

Trulia's millennials report found that buying is less expensive than renting in 98 out of 100 of the largest metro markets nationwide. Renting is less expensive than buying in Honolulu, HI, and San Jose, CA (Silicon Valley), two cities where real estate prices are far higher than in the rest of the country.

The good news is millennials can get an even better deal on home purchases in markets where the inventory of homes is larger and prices are lower, including:

Houston, TX 46 percent (less expensive to buy vs. rent).
Baton Rouge, LA 45 percent (less expensive to buy vs. rent).
Syracuse, NY 44 percent (less expensive to buy vs. rent).
Ft. Lauderdale, FL 44 percent (less expensive to buy vs. rent).
Miami, FL 43 percent (less expensive to buy vs. rent).

Things may not, however, stay this way forever. In Las Vegas, it's 20 percent cheaper for millennials to buy rather than rent, but that margin was at 43 percent in 2012 before home price increases lessened the savings available from buying vs. renting.

Rising prices and the possibility of interest rate hikes could also change the equation in other markets. For prospective home buyers interested in learning more, United Guaranty's website has a detailed comparison of the costs of buying versus continuing to rent.

When friends and family members have questions about a potential home purchase, point them to the comprehensive Resources for Home Buyers United Guaranty provides on our website.

JoAnne Skerritt

United Guaranty Regional Vice President JoAnne Skerritt has more than 34 years of experience in the mortgage industry. Based in Massachusetts, she has been regional vice president for United Guaranty's Northeast region since 2002. She was previously senior account executive from 1997 to 2002. Prior to joining United Guaranty, she was a marketing and training officer with MassHousing. She is a member of the Board of Directors of the Massachusetts Mortgage Bankers Association Foundation. She earned a bachelor of science degree from Plymouth State University in 1981.

© United Guaranty Corporation 2015. All rights reserved. United Guaranty is a marketing term for United Guaranty Residential Insurance Company and United Guaranty Mortgage Indemnity Company and is a registered mark. Coverage is available through admitted company only.