The cost of real estate has always been higher in major cities, but over the last decade this has caused many homeowners to seek less expensive housing alternatives. Those who are still living in a major city, however, are able to take advantage of the still unstable housing market.
Market Comparison for Major Cities
To truly get a feel for market conditions, it is important to compare similar housing options. Because some areas tend to favor apartments or condos over traditional houses, this comparison will look at all housing options for a three bedroom that are purchased instead of rented.
In Manhattan, a three bedroom apartment will cost an average of $1.4 million. The area is still recovering from the recession, but the market prices are rising by approximately five percent per quarter.
Los Angeles provides potential homeowners with the option to purchase an apartment, condo or a more traditional home, and the average cost for a dwelling with three bedrooms is $395,000. Although this price is much lower than the average in Manhattan, it can be slightly misleading due to the diverse range of neighborhoods and price ranges throughout the city.
Chicago's architecture might be extremely different from the popular styles in Los Angeles, but the housing conditions are similar. A purchaser who is looking for a three bedroom home within the city can expect to pay an average of $390,000.
Market Comparison for Major Suburbs
Choosing to live in the metropolitan Chicago area definitely has its perks; not only will you be able to avoid some of the traffic of the city, but you will also be able to score a three bedroom home for approximately $188,000. The ability to save over $200,000 is definitely a prime reason buyers settle into the suburbs of Chicago instead of the city.
At a first glance the suburbs of Los Angeles actually look more expensive than the city itself, but a true analysis requires a comparison of the neighborhoods and included features. For example, a three bedroom home in Lakewood will cost an average of $390,000, but the buyer will most likely gain a lot of space along with the $5,000 that they will save on the average price.
Brooklyn provides those with a New York state of mind with a low-cost alternative to Manhattan. Although the average price of $760,000 is still way higher than areas such as Los Angeles and Chicago, it is a staggering $640,000 less than buying a three bedroom in Manhattan.
Why Choose a Big City?
Although the price difference may make most people decide that the suburbs are a no-brainer, there are several reasons why an individual or a family may choose a major city instead. Even though a three bedroom home in a major city is almost guaranteed to be much smaller and more expensive than a three bedroom in the suburbs, the city offers more diversity and more job opportunities. There is also a certain level of status that comes with having a home in a major city, and many people are willing to pay double to attain that status.
Is Renting Better?
Rental rates vary even more widely from neighborhood to neighborhood than home prices, so it is imperative to do a lot of research. Renters will still find lower prices in the suburbs, however. For example, a three bedroom rental in Brooklyn will average $2,000, while a Manhattan rental will average approximately $5,000. Renting does come with the perk of allowing someone to enjoy big city life without committing to a mortgage, but it also comes with the downside of spending money without obtaining a piece of real estate.
Karl Stockton writes on real estate, investment, finance and current affairs. This article was penned for Allied Mortgage Direct.