Renting is now cheaper than owning in all of America's 50 biggest metro areas

By Aarthi Swaminathan

High mortgage rates and rising prices make home-buying more expensive than renting in the top 50 metro areas

Thanks to high home prices and rising mortgage rates, it's now cheaper to rent than it is to buy a home in all of America's biggest metro areas, according to a new report by Realtor.com.

In its February monthly rent report, the company found that it's more affordable to rent than to buy a home in all of the top 50 metro areas in the U.S.

While it was already cheaper to rent versus buy in 90% of metros as of last year, an expensive home-buying market has pushed that to 100%.

And it's the first time that has happened since Realtor.com began tracking renting versus buying in 2021.

"With rents continuing to fall and the cost of buying a home remaining high" due to rising mortgage rates and home prices, "renting a home is now a more cost-effective option in all major U.S. markets," Danielle Hale, chief economist at Realtor.com, said in a statement.

Realtor.com is operated by News Corp subsidiary Move Inc., and MarketWatch is a unit of Dow Jones, which is also a subsidiary of News Corp (NWS).

To be sure, buying a house is a form of forced savings that builds wealth and appreciates over time. But the current market is too expensive for many Americans, given a steep rise in borrowing costs and home prices, relative to rents.

For instance, the median rent in the New York-Newark-Jersey City metro area was $2,852, which was far cheaper than the $4,995 monthly cost of buying.

Realtor.com calculates the monthly cost of buying a home by averaging the median listing prices of studio, one-bedroom and two-bedroom homes in a market; it is weighted by the number of listings in each market. It also assumes that buyers are putting down 8% on the home with a mortgage rate of 6.78%, and the figures include taxes, insurance and homeowners association fees.

Why rents are falling in the Austin area

That gap between renting and buying is the widest in the Austin-Round Rock-Georgetown metro area in Texas, where the median rent was $1,530, while the monthly cost of buying was $3,695 in February.

In other words, it was 142% more expensive to buy a home in that metro area versus renting.

Rents were lower there in part because of increased supply. "There's definitely quite a bit of rentals on the market in certain neighborhoods," Cynthia Mattiza, an Austin-based real-estate agent with JB Goodwin, told MarketWatch.

Austin has seen a wave of new apartments hit the market in recent years, according to analysis by RealPage Analytics, a real-estate software company. In 2023, over 17,000 new apartment units were added to the market in Austin, which increased the total inventory of apartments by 6%, the company said. The city is expected to see an 11.2% increase in apartment inventory this year.

The Seattle-Tacoma-Bellevue metro and the Phoenix-Mesa-Chandler metro ranked second and third, where renting was $2,422- and $1,528-a-month cheaper than buying a home, respectively.

Nationally, rents fell across the board in February, Realtor.com said, which is why it's becoming more affordable to rent than to own. The median rent was $1,708 overall, which is down 0.4% from a year ago.

Meanwhile, the 30-year mortgage rate marched upward in March, according to Freddie Mac data.

The median sale price of a home in March was $374,047, Redfin said in a blog post. That translates to a monthly mortgage payment of roughly $2,685, for a 30-year mortgage at a 6.74% rate.

How have higher home prices affected your life and how you think about the U.S. economy? Let us know at readerstories@marketwatch.com. One of our reporters might reach out to you to learn more.

-Aarthi Swaminathan

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03-26-24 0600ET

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