A family living in Rapid City decided to crunch some numbers one day. They wondered if, given their monthly rent, it might be better to put that money toward a mortgage instead. Recently, more families have started to make this calculation.

First, looking at the rent, Zumper reports that the average rent in Rapid City is $1,375. This is a 15.1 percent increase from a year ago. This means that if you have the same budget, the situation has changed significantly from last year to this year, which is why this family started doing the math. As their monthly expenses noticeably increased, it was natural to think that it might be better to spend that money elsewhere.

In contrast, home prices have not risen as quickly as rent. According to Zillow, the average home value in Rapid City is $365,969, which is only a 1.9 percent increase over the past year. Comparing the two, you can see how rent and home sales diverge. In areas where home prices rise slowly, rent often increases first, with home prices following later.

If we calculate the price-to-rent ratio by dividing $365,969 by the annual rent of $16,500, we get about 22. This is around the national average. However, this number reflects the average trend over the past year; if we only consider the recent sharp rise in rent, the calculations may lean more toward buying.

Looking at the numbers this family calculated, they found that with a 20 percent down payment of about $73,000 and financing the rest with a 30-year fixed-rate mortgage, their principal and interest payments would be around $1,850 per month. Including property taxes and insurance, their actual monthly burden could rise to about $2,150. Compared to the current rent of $1,375, this results in a difference of about $775 per month. However, considering that rent was nearly $200 lower a year ago, this gap could narrow in the future.

That said, simply comparing rent and mortgage payments in terms of amounts can be misleading. Mortgages include not just principal and interest but also property taxes and homeowners insurance. South Dakota has no state income tax, but its property tax rates are not low, so it's important to check the property tax bill for any specific property. The total monthly payment can vary significantly depending on how much down payment is made.

Ultimately, this family had a sufficient down payment and planned to stay in the area for more than five years, so they decided to go with buying. Conversely, if someone plans to stay for a shorter period or may move in the future, they might need to move again before recouping closing costs, so even during a time of rising rents, it may be safer to plan first rather than rush into a decision.

If you are a Korean family considering this area, be sure to also look into school district ratings. While GreatSchools ratings can be a reference, school district boundaries change frequently, so it's best to verify the assigned school for the specific address before making a purchase.

It's worth considering how the choice between maintaining a rental versus moving to a purchase will evolve over time with the same budget. Maintaining a rental means no immediate large cash outlay, but during a time when rents are rising over 15 percent, monthly expenses could be much higher in a few years. Transitioning to buying involves initial cash outlay and closing costs, but with a fixed-rate mortgage, the principal and interest payments will not change significantly during the contract period. If you are still short on the down payment or are uncertain about how long you will stay in the area, it may be safer to focus on saving plans rather than rushing into a decision.

This article is not investment or legal advice, and it is recommended to consult with real estate and tax professionals before making any actual contracts.