Renting More Affordable than Buying Starter Home in Most Large Cities
Higher mortgage rates are increasingly tipping the housing affordability scale in favor of renting over first-time buying, the National Association of Realtors reported.
Nationally, the gap between monthly starter homeownership costs and rents widened by $483–more than 25 percentage points–from January to June, the Realtor.com Monthly Rental Report said. More than three-quarters of the 50 largest U.S. metros favored renting in June, compared to just under half of these markets in January.
“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,” said Danielle Hale, Chief Economist with Realtor.com. “Our analysis shows that if not for higher mortgage rates, the rent versus first-time buying gap would have shrunk in the first half of this year, as rents grew more quickly than starter home prices.
While more markets offered relative rental affordability in June than in January, rents are still rising across the country, the report said. “Plus, many of the areas that favored renting are among the biggest tech cities, where real estate tends to come at a premium,” Hale noted. “As housing affordability remains a challenge for many Americans, it’s key to stay on top of how higher costs impact your budget, whether renting or first-time buying.”