Methodology
Every city analysis on this site uses the same underlying financial model, applied to market-specific data. This page explains that model — what it calculates, what it assumes, and where the input data comes from.
The Core Question
We frame the buy vs. rent decision as a net worth comparison, not a monthly cost comparison. That distinction matters enormously.
A renter who pays $2,000/month instead of a buyer's $4,000/month doesn't simply “save” $2,000/month — they have $2,000/month (plus the invested down payment) available to put to work in the market. The correct comparison accounts for what that capital earns over time against what the buyer's equity earns through appreciation and principal paydown.
The break-even year in our analyses is the point at which the buyer's total net worth (home equity minus transaction costs, plus any invested savings) surpasses the renter's total net worth (invested down payment and monthly savings, compounding at the assumed investment return rate). That is a richer and more honest framing than simply comparing rent to a mortgage payment.
Data Sources
Home Prices
Median home prices are sourced from Zillow Research median sale price data and cross-referenced against the US Census Bureau American Community Survey (ACS 5-year estimates). For cities where recent transaction volume is sufficient, we weight toward the more current Zillow data; for smaller metros where ACS coverage is more complete, we use ACS as the primary source. Data is reviewed and updated quarterly.
Rental Rates
Median rent figures use HUD Fair Market Rents as a floor and are calibrated against local MLS aggregates and Zillow rental data to reflect current market rates. We model rent for a unit comparable to the purchase (2–3 bedrooms, same metro area) rather than the citywide median across all unit sizes.
Mortgage Rates
We use the Freddie Mac Primary Mortgage Market Survey (PMMS) weekly national average for 30-year fixed-rate mortgages as the base rate. For each city article, the rate reflects the survey average at the time of the most recent data update.
Property Tax Rates
Effective property tax rates are sourced from state and county assessor databases. We use effective rates (taxes paid ÷ assessed value) rather than nominal rates, which better reflects the actual tax burden after exemptions and assessment caps. States with notable caps or quirks (California's Prop 13, Texas's homestead exemption, etc.) are modeled according to their actual rules, not a generic national rate.
Tax Treatment
The tax benefit of homeownership (mortgage interest deduction, state-level MID where applicable) is modeled using IRS Publication 17 and current-year federal and state marginal rates. We account for the standard deduction threshold, the SALT cap, and state-specific rules. The benefit is calculated year by year as the deductible interest amount declines with the loan balance.
Key Assumptions
Home Appreciation
Home appreciation rates are set per-city based on historical 10-year CAGR data from the FHFA House Price Index, adjusted for recent trend data and local market conditions described in each article's market context section. We use city-specific rates rather than a national default.
Rent Growth
Annual rent growth is estimated based on historical metro-level rent trends from HUD and Zillow data, calibrated to recent market conditions. Like appreciation, this is set per-city.
Investment Return Rate
The renter's invested capital (down payment + monthly savings from lower housing costs) is assumed to earn a 7.5% annual return, which reflects a long-run blended return for a diversified equity-heavy portfolio (S&P 500 historical average adjusted downward for a realistic mixed portfolio). This is a configurable assumption in the embedded calculator.
Maintenance Costs
Annual maintenance is modeled at approximately 1% of home value per year in year 1, which is a widely-used rule of thumb for typical homes in average condition. This covers routine upkeep; it does not include major capital expenditures (roof replacement, HVAC, etc.), which vary significantly by home age and condition.
Transaction Costs
Buying costs include closing costs (estimated at 3–4% of purchase price), which are included in the buyer's initial cost base and affect the net worth comparison in early years. We do not model selling costs (agent commissions, transfer taxes) unless the analysis explicitly covers a specific holding period.
The Sensitivity Analysis
Each article includes a sensitivity table showing the break-even rate for home appreciation, rent growth, and investment return at multiple time horizons. This answers the question: “How wrong does my assumption need to be before the verdict flips?” When the break-even rate is close to the base assumption, the decision is fragile. When it's far away, the conclusion is robust even under adverse scenarios.
What This Model Does Not Account For
- Lifestyle and flexibility value:Owning provides stability and customization that renting doesn't. Renting provides mobility that ownership doesn't. These are real but unquantifiable.
- HOA fees: Not included in the base model. Where relevant, the market context section of individual articles notes HOA prevalence.
- Insurance beyond homeowner's: Flood insurance, earthquake insurance, and other supplemental coverages are not included.
- Personalized tax situations: The tax model uses a single representative income and filing status per city. Your actual outcome depends on your income, filing status, and deduction profile. The embedded calculator allows full personalization.
Update Cadence
City analyses are reviewed and updated quarterly as Freddie Mac mortgage rate data, Zillow price data, and HUD rental data are refreshed. Significant market events (rate spikes, notable price corrections) may trigger off-cycle updates. The Updated date on each article reflects the most recent data review.
Questions
If you believe a figure is incorrect or want to ask about a specific modeling choice, use the contact page. We take correction requests seriously and update articles when data warrants it.