Should I rent or buy a home in the USA?

To be or not to be? That isn’t the question. The dilemma facing most people today is another one entirely: to rent or to buy?

It is one of the biggest financial decisions you can make, whether you are a US resident wanting to leave your landlord or an expat moving to a new area, unsure of whether to take the plunge straight away. In the years of growth since the global financial crisis, the property market’s varying speeds of recovery mean that it this age-old question requires greater consideration than ever.

To help you make a decision, we answer the main questions you’ll be facing:

Is it cheaper to buy than rent in the US?

This is the first thing any renter considering swapping their monthly fee for a mortgage payment will be asking: is the housing ladder more affordable, or is it cheaper to stay off the rungs altogether? In 2016, the conditions are actually better than they have been for some time, with strong employment growth across the US and mortgage rates at all-time lows. Together with rising rents, it can be significantly more affordable to buy a home instead of renting – although house prices are climbing too, so it is always worth browsing your local market to determine what the average costs are.

Are mortgage rates good?

The biggest obstacle to buying a house is raising the funds for a deposit – but if you can get over that hurdle, the thing that will determine the affordability of your home is the morgage rate. Are they good at the moment? In 2016, again, conditions are superb, with mortgage rates falling in 14 of the last 19 weeks, according to Freddie Mac. Indeed, the 30-year rate is (at the time of writing) down to 3.57 per cent, the lowest figure recorded this year to date and the lowest mark in three years. As always, it is worth checking with Freddie Mac’s mortgage barometer to judge conditions, if only to make sure they don’t rise in the future.

Are rents going up or down?

Saving up for your deposit is a struggle when your salary is being spent on your rent. Rents, in fact, have risen significantly in recent years, due to high deman from tenants. According to Zillow, the national median rent at the end of 2015 was $1,381, with some of the fastest growing metros recording double-digit annual increases – a rise that placed a large deal of pressure on tenants’ budgets. Is your rent set to continue? The answer will vary depending on your location, but rental growth across the US is forecast to cool in the coming year, due to rising supply, which will mean that they only climb 1.1 per cent to $1,396. That may well mean you have enough money to save up to jump onto the housing ladder.

What are house prices doing?

Rents may be an important factor to consider, but house prices are an equally vital concern – and here is where you may find yourself in a pickle. Record low mortgage rates mean that the current wave of would-be homeowners are the luckiest in a generation, but low supply means that house prices continue to climb. In half of the USA’s largest markets, prices are rising the fastest among entry-level homes, according to Zillow. For those planning to buy high-end property, supply is wider, competition is less heated and prices are growing at a slower rate. At the bottom end of the market, though, prices have climbed 20 per cent in markets such as Denver.

What areas are best to buy property in the USA?

If we haven’t emphasised it enough yet, location is the biggest factor in choosing whether to rent or buy a home, as the regional markets recover at different speeds. Where, then, are the most favourable locations for buyers? One recent report from Zillow looked for places where it’s more affordable to make a monthly mortgage payment than a monthly rental payment, as well as considering competition from all-cash buyers and investors. The result found that Indianapolis, Pittsburgh, and Memphis, Tenn. are the best markets for first-time home buyers in 2016, with Cleveland, Chicago, Houston, and Birmingham, Alabama, also in the top 10 most favourable hotspots.

In Indianapolis, for example, you can to spend 11 per cent of your income on a monthly mortgage payment, 4 percentage points less than the US average, or 26 per cent of your income on monthly rent.

In which areas should I be renting?

If you are one of many younger buyers with a job in the tech sector, bad news: you may be stuck renting for some time. In markets such as San Jose, Seattle and Austin, supply is so limited and house prices have climbed so high that it will be cheaper to rent than to buy. Salt Lake City, Washington, New York/Northern New Jersey, Los Angeles, Sacramento, San Francisco, San Diego are also worse for first time buyers than renters.

What can I do to improve my chances of buying a home?

Planning to make the move into home ownership? There are steps you can take to boost your chances. Get pre-approved for a loan, if you can, to prove to a seller that you are serious about purchasing – and, if you are using an estate agent, make sure you choose one who has experience with bidding wars so that you can beat other buyers to the contract. When making an offer, also consider matching the asking price, to show that you mean business.

To browse our listings of property for sale in the USA, click here.