June 24, 2024

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10 Major US Cities Where Renting Saves More Money Than Buying

A combination of soaring mortgage rates, still-high home prices and falling rents have made it more affordable to rent than buy in all of the top 50 U.S. metros, according to a new Realtor.com report.

In fact, in February, the mortgage payment on a starter home in the largest metros cost $1,027 (+60.1%) more than the monthly rent in those markets, on average, the report found.

And the fact that renting is now a more cost-effective option in some major U.S. markets is even more salient in some cities.

“Generally speaking, on the buy-cost side, the growth of housing prices and elevated mortgage rates kept pushing up buy-cost, making buying more expensive,” said Realtor.com economist Jiayi Xu.  

Meanwhile, Xiu added, on the rental cost front, declining rental prices, driven by an increase in the number of new rental properties entering the market, have bolstered supply and exerted downward pressure on rental prices, making renting more budget-friendly.

“These factors contribute to widening the gap between buying and renting costs, rendering renting a more cost-effective option across all of the top 50 markets,” added Xu.

She added, however, that while renting is a more affordable option than buying in all major markets, it doesn’t mean the current rent is affordable.

“In fact, today’s rent is $252 (17.3%) higher than the same time in 2020 (before the COVID-19 pandemic), suggesting ongoing affordability challenges in the rental market,” she said.

Xu also noted that factors contributing to this trend vary by city. For instance, in Austin, Texas – one of the markets that saw the largest rent declines – one possible factor could be the influx of new multi-family constructions onto the market.

“Our previous rental report indicates that the southern market experienced substantial growth in rental stocks, thereby increasing supply and reducing rental prices,” said Xu.

Meanwhile, Seattle, Wash. – the second top market favoring renting over buying – is one of the important tech hubs on the West Coast and offers more affordable housing compared to California tech peers like San Francisco and San Jose, said Xu.

“This affordability attracts tech workers, driving up demand and subsequently inflating housing prices, ultimately making buying more expensive than renting,” added Xu.

Here are the top 10 U.S. metros where renting is more cost-effective than buying.