It's cheaper to rent than to buy in 3/4 of U.S. cities
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Rents have soared over the past year — but renting is still more affordable than buying at the entry-level in three-quarters of the country, according to a new analysis released Thursday by Realtor.com.
Why it matters: This is a big shift from January when renting had the edge in a little over half of the markets.
- The difference now is higher mortgage rates, which make the median payment on a "starter" home more costly than on a comparable rental apartment, according to its analysis. Home prices have not yet started to fall, which could balance out the equation.
The big picture: Whether to rent or to own is a timeless conundrum, filled with intangible caveats. Some people want to put down roots for the long haul. Others don't want to deal with the hassle (or expense) of maintaining a house or apartment.
- In a housing boom, when home prices are rising, renting is typically a better bet. But in the pandemic era, with more people looking for more space all at once, both options got more expensive.
- Rent increases do seem to be slowing down. Average rents grew for the fifth consecutive month, up 14.1% from last year — that's down from a peak in January of 19%, per Realtor.com.
State of play: The analysis shows that some of the most expensive markets for homes are where it's most economical to rent.
- In Austin, it costs 97.8% more to buy a starter home than to rent — a difference of $1,822. In San Francisco, it's 80% more.
- The analysis considered asking rents in June for studio, 1- and 2-bedroom apartments listed on Realtor.com and at large apartment complexes, compared to a monthly payment for a starter home (up to only two bedrooms) based on June mortgage rates and list prices.
