Is It Better For Retirees To Rent Or Buy?

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The debate rages on between renting and buying, and this time it focuses on what’s best for those entering their golden years

April 21, 2016

Photo Credit: Mariamichelle, Pixabay

Ali versus Frazier, Cubs versus Cardinals, Capulets versus Montagues; while these are all great rivalries, it seems as though when talking about the 21st century, they have all been supplanted by the matchup of renting versus buying. Much has been discussed about which one is more financially viable and for whom; millennials, families, it seems as though the rent versus buy debate has been discussed from every angle possible.

Well, here is another; Renting Versus Buying: The Retiree Edition. Like most of these debates, it seems pretty straightforward on the surface. Nationally, and across all age groups, buying is cheaper than renting and the margin has actually grown since last year. For any households that move every seven years and can afford to put 20 percent down, it is 34.8 percent cheaper to buy than to rent, according to Trulia. Last year, that number was 34.2 percent. For retirees specifically, it is cheaper to buy than rent in all major metros by 41.8 percent.

But that is just the surface level, there are always variables that turn the debate on its head. For example, if a retiree doesn’t care about leaving an inheritance, renting makes more sense. In fact, without the desire to leave an inheritance, renting becomes a better option in 98 of the 100 cities with the highest levels of retirees. This is due to the fact that one of the main things that make buying cheaper is the value of home equity. If renters don’t care about it, then the benefits of homeownership fall drastically.

The South was home to the most metro areas where buying beat renting by the largest margin with New Orleans, La., having the largest difference. It is 52.3 percent cheaper to buy than to rent in New Orleans. Baton Rouge, La., was not far behind at 51.3 percent cheaper. Out of the top ten cities with the largest margins between buying and renting, only two of them were not in the South. Detroit was fourth on the list with a difference of 50.6 percent and Philadelphia was seventh with a difference of 49.1 percent.

Conversely, California dominated the list of metros where the financial advantage of buying was the slimmest. San Jose, Sacramento, Oakland, Orange County, san Francisco, Ventura, and Los Angeles were all located in the top ten. However, the number one spot on the list was reserved for Honolulu, Hawaii, where it is only 14.4 percent cheaper to buy then to rent.

However, if the discussion is changed to specific cities, as opposed to metro areas, things change slightly. Retirees may not be interested in some of the factors associated with the overall metro area like commute times, employment prospects, or proximity to good schools. But city-level factors become more important.

When examined through this lens, the top ten retirement cities where it is cheapest to buy are all located in Florida and range from 71.6 percent cheaper to 60.4 percent cheaper.

For the full report and to view accompanying graphics and charts, follow the link below.

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