Rent vs Buy: Buying a Home is More Affordable in a Growing Number of Cities.

If you are a renter thinking about becoming first time homebuyer may be happy to see that the number of cities that favor buying over renting is increasing. In our rent vs buy analysis, for each metro area, we compared the monthly cost* of buying a home for the median listing price against the median monthly rent of two- to four-bedroom units in the area. The monthly cost of buying a home is the same or more affordable than renting in 15 of the 50 largest metros, up from 13 markets a year ago. Moreover, there are several “borderline” markets where the monthly cost of buying a home is within 5% of the cost of the median rent in the area.

Despite the historic growth in home prices over the past year, the monthly cost of buying in the 50 largest metros has remained essentially unchanged, thanks to low mortgage rates. In the wake of the pandemic, mortgage rates dropped to historic lows, making it cheaper to borrow money, which put a little money back into homebuyers’ pockets, offsetting the increased cost of more expensive homes. So, while the median listing price of homes in the 50 largest metros has increased by 10.9% on average, the monthly housing costs have only increased by 0.2%.

Where is purchasing a home favored?

In the 10 metros below, the difference between the monthly cost to buy a home and rent a home most strongly favored buying in January. The monthly cost of buying dropped, while rents increased almost 5% during the last year. The end result is that those who buy in these metros are able to save an average of 11% in monthly costs compared to renters.

Rent vs Buy – Top 10 Markets that Favor Buying

Where is renting a home favored?

Renters in these metros save an average of 30% in monthly costs compared to buyers. Many of these markets represent tech hubs, which have seen rents plummet in response to the pandemic. With working from home becoming a more viable option for workers in these areas, many have elected to leave these urban centers for more affordable options elsewhere.

Rent vs Buy – Top 10 Markets that Favor Renting

Rent vs Buy – All Markets that Favor Buying

“Borderline” Markets – Monthly buying costs within 5% of renting costs

Methodology

*Purchase and rent costs reflect current costs and do not take into account holding period, price and rent appreciation, and inflation. Purchase costs are based on purchasing with a 30-year fixed-rate, fully amortizing mortgage of 80% (20% down payment), and do include taxes and insurance and are calculated based on realtor.com metro-level residential listing price data and Optimal Blue mortgage rate data for January 2021. Rental prices include data from apartment communities as well as private rentals (condos, townhomes, single-family homes) listed on realtor.com. All rental units were 2- to 4-bedrooms in size so as to be somewhat comparable to the typical home purchase. Homebuyer surveys show that the typical home purchase has 3 bedrooms. Household income data is from 2021 Claritas estimates are based on Census data. Only the 50 largest metros (ranked by number of households) were included in this analysis.

 Courtesy of Realtor By Nicolas Bedo, Danielle Hale, Sabrina Speianu

[optima_express_toppicks id=”1540763″ sortBy=”pd” displayType=”grid” resultsPerPage=”10″ header=”true” includeMap=”true” status=”active”]