SANTA CLARA, Calif. – (By Dale King, Realty News Report) – A new analysis from Realtor.com finds that, with rents falling through July, renting a starter home in any of the 50 largest U.S. metropolitan areas remains a more affordable choice than buying—at least for now.
The report highlights Austin and nearby suburbs Round Rock and Georgetown as the top markets for rent-versus-buy savings. In those areas, the median monthly cost to buy a starter home is about $3,558, compared with a median monthly rent of $1,468. That gap—$2,120 per month—means buying costs roughly 144.4 percent more than renting.
Other Texas markets also offer notable savings for renters. In the Dallas–Fort Worth–Arlington metro, median monthly rent stands at $1,481 while buying a starter home equates to about $2,788 per month, a difference of $1,307 (about 88.3 percent). Houston’s metro area posts a median rent of $1,402 versus an estimated purchase cost of $2,442 per month, a $1,040 gap or 74.2 percent. In San Antonio–New Braunfels, median rent is $1,232 compared with a $2,035 monthly cost to buy, a difference of $803 a month, or 65.2 percent.
Beyond Texas, several large metros also favor renting over buying. Seattle, Los Angeles, San Francisco, New York and Columbus, Ohio are among markets where rental affordability pushed them into the report’s top-ten list of rent-favorable metros.
“For every major U.S. metro, renting a starter home continues to be more affordable than buying a starter home, continuing a trend we saw this February as elevated mortgage rates, high home prices and falling rents contributed to the more than $1,000 savings in renting over buying,” said Ralph McLaughlin, senior economist at Realtor.com.
However, McLaughlin cautioned that the advantage for renters may be shrinking. “We are starting to see the advantage of renting over buying decrease across several metros, especially as more affordable inventory hits the market,” he said. “It has been a challenging time for potential first-time homebuyers, especially as rents have been so favorable. But with mortgage relief finally on the way, we might continue to see the advantage of renting shrink, giving homebuyers a path into their first home.”
The report notes that the renting advantage has narrowed compared with last year. A year ago, buying a starter home in the top 50 metros was on average 63.3 percent more costly than renting; this July, that premium fell to 61.3 percent—still meaning buying remains costlier than renting, but the difference is closing slowly.
Across the top 50 metros, the overall renting advantage tightened by two percentage points—about $42 per month—compared with a year earlier. Despite that shift, the current monthly cost to buy remains $758 higher on average than it was five years ago (pre-pandemic).
Over the past year, 23 of the 50 largest markets saw the rent advantage shrink, with the largest reductions reported in San Francisco, San Jose, Denver, Washington, D.C., and Miami. “It is not surprising to see the rent advantage diminish most in these metros as homes in these markets experienced large listing price declines on a yearly basis,” McLaughlin said.
The Realtor.com analysis attributes the narrowing gap mainly to an influx of smaller, more affordable homes hitting the market, which has led to modest declines in starter-home listing prices in many areas. If that trend continues alongside easing mortgage costs, first-time buyers may find more opportunities to transition from renting to owning.
Aug. 20, 2024 — Realty News Report Copyright 2024
Photo Credit: Ralph Bivins, Realty News Report Copyright 2024
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File: Renting is Better Than Buying