Rent vs. Buy Analysis Boston

rent vs buy analysis Boston, MA

Among all the difficult decisions that come with looking for a new place to live, deciding whether to buy a home or rent an apartment can be one of the hardest. It’s a decision that can have long term implications on your financial well-being, and in a competitive and expensive real estate market like Boston, the decision only becomes more difficult.

Many people make these decisions based on emotion or gut feeling, which ends up resulting in mixed outcomes. However, with the right data, you can can paint a pretty clear picture of how renting vs. buying can affect your finances both in the short term and the long run.

In this analysis, we will break the average monthly costs of owning a home in Boston vs. renting an apartment. We do this by analyzing the most recent median home price data from MLS, property tax rates, and average homeowner’s insurance to calculate the anticipated monthly expenses of owning a home in Boston. We then compare that figure to the most recent average rent prices for Boston apartments.

Boston Single-Family Rent vs. Buy Analysis

The shortage of single-family homes for sale in Boston has been well documented in recent years. This short supply combined with Boston’s growing demand for housing has sent prices for single families through the roof in recent years. As a result, the median sales price for a home in Boston is $772,925 over the past 12 months.

We can estimate what a mortgage would cost monthly for that median sales price by factoring in current interest rates, property tax rates, and average homeowner’s insurance for Boston residents. With a 30% down payment and 3% interest rate on a 30 year loan, a monthly mortgage payment plus taxes and insurance would be equivalent to $3,091 per month.

Compare that to the average rent price for apartments in Boston, which currently stands at $2,532, a homeowner in Boston would be paying $559 more per month to own a home as opposed to renting an apartment on average.

Boston Condo Rent vs. Buy Analysis

Unlike single-family homes, the supply of Boston condos for sale has been steadily increasing in recent years as new development projects have been completed. As a result, the median sales price for condos in Boston is at $698K, about $75K less than the media single family price.

If we run the same math on the median condo sale price, then add an additional $300 to the monthly expenses to account for the HOA fee a condo owner would pay, the results are very similar. The monthly mortgage, taxes, insurance, and fees for a condo owner in Boston sits at $3,106. So it would cost a homeowner $574 more to own a condo compared to renting an apartment in Boston on average.

So case closed, right? At least for short term financial outlook, renting an apartment is definitely cheaper in Boston than owning a home. Not so fast. A deeper dive into MLS data may paint a different picture.

By the Bedroom — Renting vs. Buying in Boston

When we analyze median sales prices and average rent prices by the size of the housing unit, what we find a very different outcome.

Studio Unit — $425,000 median sales price

• $1,758 estimated monthly mortgage, tax, and insurance
• $1,716 average rent price
• -$42/month to own a home vs. renting

1 Bedroom Unit — $585,357 median sales price

• $2,372 estimated monthly mortgage, tax, and insurance
• $2,020 average rent price
• -$352/month to own a home vs. renting

2 Bedroom Unit — $715,706 median sales price

• $2,872 estimated monthly mortgage, tax, and insurance
• $2,516 average rent price
• -$356/month to own a home vs. renting

3 Bedroom Unit — $773,863

• $3,094 estimated monthly mortgage, tax, and insurance
• $3,060 average rent price
• -$34/month to own a home vs. renting

4 Bedroom Unit — $851,882

• $3,393 estimated monthly mortgage, tax, and insurance
• $3,659 average rent price
• $266/month to own a home vs. renting

5 Bedroom Unit — $1,021,538

• $4,043 estimated monthly mortgage, tax, and insurance
• $4,485 average rent price
• $442/month to own a home vs. renting

So it would appear that on average, renting an apartment makes sense financially for smaller living units up to 3 bedrooms. However, for larger units, it’s actually less expensive to own a home in Boston compared to renting a larger apartment. Even the studio and 3 bedroom comparisons are very close to breaking even, suggesting there are cases where it would be smarter to purchase a home rather than rent apartments of these sizes.

It’s important to disclose that these are only averages, and that each individual property in Boston will present its own analysis based on the listing price. Never discount an area or a property based solely on a preconceived notion, because you may end up missing out on a great deal. Still, knowing data like this can help you considerably in your decision on whether to rent or buy a home in Boston.