The monthly cost of owning a starter home was more affordable than the rent on a similarly-sized unit in just over half of the 50 largest U.S. metro areas in January, according to a new report by Realtor.com, a listing platform.
The top markets that favored starter home buyers include Birmingham, Alabama, ($533 a month lower than renting), Cleveland ($516 lower) and Pittsburgh ($585 lower). The report defined a starter home as having no more than two bedrooms, and monthly costs included mortgage payment, taxes, insurance and homeowners association fees; the methodology assumed a 7% down payment and a mortgage rate of 3.45%.
The report attributes this trend to skyrocketing rental prices across the nation. The median U.S. rental price spiked by 19.8% year-over-year in January. That marks the eighth straight month of rental price increases in the double digits. Realtor.com expects rents to continue outpacing listing prices in 2022.
Still, housing prices have been increasing as well. The monthly cost of buying a home with up to two bedrooms increased by 11% in January, year-over-year. Realtor.com Chief Economist Danielle Hale says in a press release that those looking to buy homes will find lower costs now than later in the year as mortgage rates continue to rise. (See Money's picks for the best mortgage lenders to start shopping around for a lender.)
Housing prices still outpace renting costs in major tech hubs
Bucking the overall trend, rent prices remain lower than starter home costs in some areas of the country.
Eight out of the top 10 metro markets that favored renting were in major tech centers like Austin, Texas, and San Francisco, according to the Realtor.com study. The monthly, first-time home-owning costs across these 10 metro areas were 41.6% ($978) higher than rents.
In January, the average monthly cost of owning was 24.8% ($536) higher than the cost of renting in 24 of the 50 largest metros.
The current housing market is facing limited inventory and expensive asking prices in major tech hubs. Moreover, Realtor.com notes that inventory in major tech centers usually includes a high share of condos, which typically involve hefty homeowners association fees, which can significantly drive up monthly housing costs.
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