It is now cheaper to rent than buy in ALL of America’s largest 50 metros – with mortgages costing double in most sought-after cities
It is a question most first-time buyers ask themselves – how long should they rent before buying a home?
But fresh data from Realtor.com means the answer for Americans across the country might be: never.
It is now cheaper to rent than it is to buy a property in all 50 of America’s biggest metropolitan areas, according to the listings company’s February rental report.
While it was already more affordable to rent than buy in the vast majority of metro areas as of the same time last year, elevated mortgage rates and soaring house prices have now flipped the remaining markets.
In February this year, the average cost of buying a starter home in the top 50 US metros was 60.1 percent higher than renting one – some $1,027 more in monthly costs. But in some sought-after areas, the cost was more than double.
It is now cheaper to rent than it is to buy a property in all 50 of America’s biggest metropolitan areas, but some cities have bigger cost gaps than others
Rents fell across the country in February, Realtor.com found. Overall, the average rent was $1,708 a month – down 0.4 percent from a year ago.
While it was down 2.8 percent – or $50 – from the peak seen in August 2022, it was still 17.3 percent – or $252 – higher than before the Covid-19 pandemic in February 2020.
The gap between renting and buying was the widest in Austin, Texas, according to Realtor.com.
The monthly cost of buying a starter home in the metro area was $3,695, which was 141.5 percent – or $2,165 – more than the typical monthly rent of $1,530.
In order to calculate monthly buying costs, Realtor.com assumed an 8 percent downpayment, a mortgage rate of 6.78 percent and included the cost of taxes, insurance and fees.
House prices in Austin boomed during the pandemic, as its sunny climate, expansive state parks and relative affordability attracted an influx of buyers.
The Texan city came to be seen as the epitome of the Sunbelt’s hot housing market, but experts are now warning that its housing bubble could be about to burst.
While property prices remain high, they have fallen since their peak. Properties in the city are typically selling for $525,750 having declined almost $150,000 from a height in May 2022, according to separate figures from real estate company Redfin.
And according to Realtor.com, buying costs have also dropped 1.6 percent in the last 12 months. Monthly rent costs, meanwhile, have dropped 4.44 percent.
Austin’s sunny climate, expansive state parks and relative affordability attracted an influx of buyers during the pandemic
The metro area with the second biggest price difference between renting and buying last month was Seattle.
‘Renting a home is now a more cost-effective option in all major US markets,’ said Danielle Hale, chief economist at Realtor.com
The monthly cost of buying a starter home was $4,422, while the median rent was $2,000 – a 121.1 percent difference.
In Phoenix, meanwhile, the cost of renting was almost exactly half the cost of buying.
While the average rent in the city was $1,543 in February, the typical monthly costs of buying a home was $3,071.
‘With rents continuing to fall and the cost of buying a home remaining high, renting a home is now a more cost-effective option in all major US markets,’ Danielle Hale, chief economist at Realtor.com, said in a statement.
According to latest data from government-backed lender Freddie Mac, the average 30-year fixed rate mortgage has risen to 6.87 percent.
High mortgage rates, alongside elevated home prices and a historic shortage of properties for sale, has meant that would-be homeowners are facing substantial challenges.
In February last year, Realtor.com found that renting was the more affordable option in 45 of the biggest metro areas across the US.
But in the 12 months since, Memphis, Tennessee, Birmingham, Alabama, Pittsburgh, Pennsylvania, St. Louis, Missouri, and Baltimore, Maryland, have flipped from buy-favoring to rent-favoring markets.
