It's now cheaper to own a home than rent in 42 states

Photo (c) designer491 - Fotolia

New York is the state where the savings are greatest

When comparing the cost of owning a home versus renting, it is easy to overlook a lot of homeowner costs that can tip the balance toward renting.

In spite of that, however, a new survey suggests it is now cheaper to own in 42 states.

"The good news is mortgage rates are near historic lows," said Kristen Bonner, lead researcher on the study conducted for the personal finance website GoBankingRates. "Unfortunately, Americans are still running into road blocks with being able to save enough money to afford a down payment, and are therefore forced to rent."

There are other road blocks too. As we have recently reported, the inventory of available homes has been going down, making it harder to find a suitable home, even if you have the down payment. New home construction remains about half of what it was before the housing market meltdown.

Assuming a 20% down payment

To arrive at its conclusion, the study compared median rent prices for single-family homes against the median list price of homes in each state. The researchers assumed buyers would make a 20% down payment, even though many first-time buyers put down much smaller amounts. However, the assumption also included the cost of property tax and homeowner's insurance.

Here are the states where consumers can save the most by owning, along with the amount saved each month:

  1. New York ($1,635)
  2. Massachusetts ($559)
  3. Illinois ($522)
  4. New Jersey ($472)
  5. Pennsylvania ($461)
  6. Florida ($398)
  7. Maine ($396)
  8. Ohio ($375)
  9. Alaska ($334)
  10. Rhodes Island ($334)

Where it pays the rent

But in eight states and the District of Columbia, the study found it is still cheaper to rent:

  1. Hawaii ($515)
  2. Montana ($248)
  3. Utah ($242)
  4. Idaho ($204)
  5. District of Columbia ($144)
  6. Colorado ($137)
  7. Wyoming ($99)
  8. Delaware ($75)
  9. Oregon ($12)

While it might seem counter-intuitive that an expensive real estate state like New York is where you can save the most money by owning, it's possible because rents are even more expensive than home prices. The study found the average New York rent is $3,295 a month, nearly twice the cost of owning a home.

Take a Home Warranty Quiz. Get matched with an Authorized Partner.