Even as rent prices soar, taking out a lease is cheaper than taking out a mortgage in most big U.S. cities.
In more than 75% of the largest 50 markets in the U.S., renting costs less than buying a starter home, according to Realtor.com’s Monthly Rental Report. For the sake of comparison, back in January renting was more favorable than buying in slightly less than 50% of these markets.
Between January and June, the difference between the cost of buying a starter home and median rent has widened by more than 25%, the report states. It's now quite a significant gap: In June, the typical monthly mortgage payment on a starter home was $2,437 — about $560 higher than the average rent.
Rising mortgage rates are the main reason why renting is more affordable in some markets, notes Danielle Hale, chief economist for Realtor.com. Mortgage rates have soared since the start of 2022, and as a result the monthly payment on a median-priced home has increased from $1,867 in January to $2,100 now.
Even as renting has become more advantageous compared to buying, renters still face a competitive market because prices — for renting and buying alike — are rising.
"With rents and for-sale home prices both hitting record highs in June, the rising cost of financing a home purchase stands out as the clear driver of rental affordability relative to typical starter homeownership costs," Hales says in the news release accompanying the report.
Renting vs. buying in today's housing market
Renting is now more affordable than buying a starter home in 38 of the 50 metropolitan areas surveyed by Realtor.com. Many of these spots where renting is the better deal are larger cities that are more geographically distributed and home to tech industries, according to the Realtor.com data. Homebuying costs were more than 50% higher than renting in all the top 10 cities.
Leading the group is Austin, Texas. This city has been a hot spot for homebuyers for the past two years as many out-of-towners were drawn in by the prospect of sunshine, remote work and a local housing market that's more affordable than some coastal big cities. It now may become a beacon for renters as well.
The monthly cost of a median-priced starter home in Austin is $3,695. By contrast, the median monthly rent is $1,864. Buying a home will cost a whopping $1,822 more per month, nearly double the cost of leasing.
San Francisco is next in relative affordability for renters. The Bay Area is not known for being cheap, but renters will fare better than buyers. A first-time homebuyer will spend an average of $5,705 on monthly mortgage payments compared to $3,171 in rental costs.
In Seattle, the cost of a starter home will average $4,100 per month, whereas the median rent would be $2,299, or about 78% less.
Where renting is cheaper than buying
Here's the full top 10 list, and the typical monthly costs for renting and buying a starter home in each city:
- Austin, Texas: $3,685 to buy vs. $1,864 to rent
- San Francisco, California: $5,705 to buy vs $3,171 to rent
- Seattle, Washington: $4,100 to buy vs. $2,299 to rent
- New York, New York: $5,081 to buy vs. $2,989 to rent
- San Jose, California: $5,499 to buy vs. $3,324 to rent
- Portland, Oregon: $2,961 to buy vs. $1,833 to rent
- Los Angeles, California; $4,897 to buy vs. $3,051 to rent
- Boston, Massachusetts: $4,664 to buy vs. $2,966 to rent
- Houston, Texas: $2,223 to buy vs. $1,450 to rent
- Phoenix, Arizona: $2,709 to buy vs. $1,781 to rent