Renting Is Officially Cheaper Than Buying A Home In U.S. Cities
The price of renting is dropping, making it more affordable to rent than purchasing a home in 50 of the country’s largest metropolitan areas.
In February 2024, the cost of buying a starter home was over 60% higher than renting one in the top 50 metro areas. In addition to the staggering numbers, renting is deemed a more affordable option than buying in all 50 large metros, increasing from 45 simultaneously in 2023. Growing cities such as Memphis, Birmingham, Pittsburgh, St. Louis, and Baltimore were the five cities that crossed the threshold in favor of renting over buying in the past 12 months.
According to a February rental report, rental rates have dropped for the seventh month in a row. The report revealed prices fell yearly by $7 – or 0.4% – to an average of $1,708 monthly, $4 lower than in January. Analysts are comparing the price drop to being enough to buy a Big Mac from McDonalds – without fries – every month. “In all of the major housing markets, renting is more affordable than buying a starter home,” Jiayi Xu, Realtor.com economist, said.
“It’s important for first-time buyers who are thinking, ‘Should I buy now or later?’ This will give them a clearer picture of their financial costs.”
Purchasing a starter home was 60.1% higher, costing buyers about $1,027 more every month. For the top 10 cities that prefer renting over buying, the average monthly payments for a starter home were nearly double – 95.6% higher than rents. Some of those cities were Austin, Texas, topping the list. In Austin, the monthly cost to buy a starter home began at $3,695 – an alarming 141.5% more than the monthly rent of $1,530 – saving residents $2,165 monthly.
Houston, Texas, also topped the list of rent-friendly cities even though the monthly buy cost fell well below the top 50 average. Some rent-favoring markets have a higher population of tech workers and higher revenue earners, where the average rent cost and buy cost are higher than the national average.
Even in the northeast, known for its high cost of living, residents are happier renting than buying. According to Morning Star, the average rent in the New York-Newark-Jersey City metro area was $2,852, a drastic drop from the $4,995 monthly cost of buying.
However, the significant savings are seen below the Mason-Dixon line, specifically in Richmond, Virginia. In February 2023, the cost to buy a starter home was 27.5% higher than renting one in the city, but in February 2024, buying was 74.2% higher than the cost to rent. Renting a starter home in Richmond could save renters close to $700 more than buying compared to 2023. However, Los Angeles, Nashville, Phoenix, Memphis, and Raleigh were the top markets that witnessed higher savings from renting than buying in February 2024 compared to 2023.
