Renting now cheaper than owning in all 50 top cities
Thanks Biden!
Elevated mortgage rates and rising prices make home buying more expensive than renting in the top 50 metropolitan areas
Thanks to rising home prices and elevated mortgage rates, it's now cheaper to rent than it is to buy a home in all of America's biggest metropolitan 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 than to buy in 90% of metro areas as of last year, a hot real-estate 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 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 publisher Dow Jones is also a subsidiary of News Corp (NWS) (NWSA).
To be sure, buying a house is a form of forced savings that builds wealth via an asset that appreciates over time. But the current market is too expensive for many Americans, given the steep rise in borrowing costs and home prices, relative to rents, in recent years.
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 a home purchase with a mortgage rate of 6.78%, and the figures include taxes, insurance and any applicable 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 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 metropolitan 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 JBGoodwin, 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 apartment units were added to the market in Austin, which increased the total inventory 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 area and the Phoenix-Mesa-Chandler area ranked second and third, with renting $2,422 and $1,528 per month cheaper than buying a home, respectively.
Nationally, rents fell across the board in February, Realtor.com said. The median rent was $1,708 overall, 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.
https://www.morningstar.com/news/marketwatch/20240330264/renting-is-now-cheaper-than-owning-in-all-of-americas-50-biggest-metro-areas