Published by REALTOR.com | September 27, 2023
There aren’t many places left where buyers will have lower monthly mortgage payments than what they would have paid renting.
For many first-time homebuyers, making the gigantic leap from paying a landlord every month to making a mortgage payment is the difference between shelling out for just another bill—and making a true investment in their future. It can be a life-changer.
But making that leap has gotten harder as home prices and mortgage rates have skyrocketed. The Realtor.com® annual Rent vs. Buy analysis shows just how difficult it’s become for many first-time homebuyers across the country. That’s why we dug into the numbers to find the places where renters can save a few bucks (and we do mean a few) by buying, and where it’s still cheaper to remain a renter.
Spoiler alert: There aren’t many places left where buyers will have lower monthly mortgage payments than what they would have paid renting. It was cheaper to buy rather than rent in just three of the 50 largest metropolitan areas. In all the rest, residents could save more by renting. So we calculated how much more, and what places offer renters the best deals versus buying.
Higher mortgage rates, above 7%, pushed up the monthly bills of homeowners to more than $2,860 in August, including estimated property taxes and insurance costs. Meanwhile, the median monthly rent is about $1,750 in the 50 largest metropolitan areas.
So renters looking at the prospect of purchasing are facing monthly bills totaling $1,100 more—and that’s after saving tens of thousands of dollars for a down payment and closing costs.
In addition to the effect of the high home purchase cost, rents have come down in the past year, widening the gap between buying and renting, notes Realtor.com economist Jiayi Xu.
“In August 2023, the median asking rent for two-bedroom units dropped -0.7%, marking the fourth consecutive month of annual declines,” Xu wrote in her detailed report on renting versus buying.
Buying a home has always been difficult in the nation’s priciest housing markets, particularly areas in the West that have experienced the biggest price growth. But as rental prices have simultaneously dropped in many of these markets, the scales may tilt toward renters putting off homeownership longer.
