Aspiring first-time home buyers may not want to give up on that competitive house hunt: In many markets, they could save money by owning.
Buying a starter home is more affordable than renting in nearly half of the largest U.S. metros, according to a new study released by realtor.com®.
The U.S. median rental price has climbed nearly 10% year over year to $1,607. That is 15.5% higher than the monthly payments for a starter home, the lower-priced tier of homes for sale in a market. Low mortgage rates are helping to offset recent jumps in home prices.
“Rents hit new highs in 40 of the 50 largest U.S. metros this July and grew at an almost double-digit pace—the fastest yearly rate we’ve seen in the last 18 months,” said Danielle Hale, realtor.com®’s chief economist. “Sky-high rents and historically low interest rates have made the monthly cost to buy a starter home lower than renting one in nearly half the markets across the U.S.”
Still, first-time buyers will want to weigh the full costs of homeownership. “But if the monthly costs have been holding you back, data suggests it’s worth exploring in many markets,” Hale said. “Although it’s still hard to find entry-level homes, we are seeing more smaller homes coming on the market.”
Many of July’s highest rent gains were in secondary markets where rental demand has quickly climbed during the pandemic. Remote work has allowed workers to leave big cities and work from anywhere. That has also helped keep a lid on monthly starter home costs in some of the largest metros. The costs of starter homes, on average, were 15.5%—or $216—lower than rents in nearly half of the 50 largest U.S. metros, the realtor.com® study said.
In the top 10 metros that favored first-time homebuying over renting in July, monthly starter home payments were, on average, 24.3% lower than rents.