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Rental prices are falling—and it’s helping to make it cheaper to be a paying tenant than a homebuyer in America’s 50 largest metropolitan areas.
Rentals fell for the seventh month in a row on an annual basis, according to the Realtor.com® February rental report. Prices dropped annually by 0.4%, or $7, to a median of $1,708 a month in February, according to the report. Prices were $4 lower than in January.
Purchasing a starter home was 60.1% higher, costing buyers about $1,027 more every month.
The drop in median rents is enough money for a McDonald’s Big Mac every month—but probably not with a side of fries.
“In all of the major housing markets, renting is more affordable than buying a starter home,” says Realtor.com economist Jiayi Xu. “It’s important for first-time buyers who are thinking, ‘Should I buy now or later?’ This will give them a clearer picture about their financial costs.”
The report looked at asking rents for studios as well as one-bedroom and two-bedroom apartments, condos, townhomes, and single-family homes in the 50 largest metros. (Metros include the main city and surrounding towns, suburbs, and smaller urban areas.)
The biggest price cuts in the rental market were for the smallest units. Rents for studios fell 1.5% year over year in February, to a median of $1,426 a month.
Prices ticked down 0.8% for two-bedroom units, to $1,889 a month, and dipped 0.4% for one-bedroom units. The median monthly cost of a one-bedroom unit was $1,587.
“Studios are expensive for one person to live in,” says Xu. “Some young renters may move into larger units and find roommates to save money.”
The shift in the market toward renting becoming a more affordable option than buying is due to a few reasons: Rents have come down (albeit only a little) as builders construct more apartment buildings, and home prices continue to rise at a time when mortgage rates are high.
Austin, TX, topped the list of places where buying a starter home was significantly more expensive than renting one.
“People look at how it’s cheaper to rent right now than to buy or that interest rates are on the high side,” says Austin-based real estate broker Brad Pauly, of Pauly Presley Realty. He points out there are still reasonably priced homes for sale in the outskirts of the city and in the suburbs.
But, he adds that people “still consider buying real estate because it’s a great investment.”
Over time, rents may become more expensive than owning, as landlords can raise their prices anytime. But homeowners can lock in the bulk of their monthly mortgage payment. (Taxes, insurance, homeowners association dues, and maintenance and repair costs are likely to change through the years.)
“In the short term, renting may be a good way to save money,” says Xu. “But in the long term, buying could help you to build wealth.”
Below are the top 10 metropolitan areas where folks can save the most money by renting.
(Realtor.com)
Median monthly rent payment in February: $1,530
Monthly mortgage payment (including property taxes, insurance, and HOA dues): $3,695
Buying a starter home costs this much more than renting one: 141.5%
Median monthly rent payment: $2,000
Monthly mortgage payment: $4,422
Buying a starter home costs this much more than renting one: 121.1%
Median monthly rent payment: $1,543
Monthly mortgage payment: $3,071
Buying a starter home costs this much more than renting one: 99%
(Realtor.com)
Median monthly rent payment: $2,815
Monthly mortgage payment: $5,504
Buying a starter home costs this much more than renting one: 95.5%
Median monthly rent payment: $2,830
Monthly mortgage payment: $5,369
Buying a starter home costs this much more than renting one: 89.7%
Median monthly rent payment: $3,206
Monthly mortgage payment: $5,986
Buying a starter home costs this much more than renting one: 86.7%
(Realtor.com)
Median monthly rent payment: $1,589
Monthly mortgage payment: $2,955
Buying a starter home costs this much more than renting one: 86%
(Realtor.com)
Median monthly rent payment: $1,655
Monthly mortgage payment: $3,051
Buying a starter home costs this much more than renting one: 84.4%
Median monthly rent payment: $1,845
Monthly mortgage payment: $3,359
Buying a starter home costs this much more than renting one: 82.1%
(Realtor.com)
Median monthly rent payment: $1,379
Monthly mortgage payment: $2,482
Buying a starter home costs this much more than renting one: 80%
Clare Trapasso is the executive news editor of Realtor.com. She was previously a reporter for the Associated Press, the New York Daily News, and a Financial Times publication. She also taught journalism courses at several New York City colleges. Email clare.trapasso@realtor.com.
Twitter Follow @claretrap
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It's Now Officially Cheaper To Rent Than Buy a Home in the 50 Largest U.S. Metros – Realtor.com News
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