It’s now cheaper to rent than buy in all 50 of the top metros nationwide, per Bankrate.
If you're deciding whether to rent or buy a home right now, renting is generally the more cost-effective option in most major U.S. cities, according to a new analysis by Bankrate.
Nationwide, buying a typical home costs nearly 37 percent more per month than renting. Rent increases have slowed across the U.S. over the past year, while high home prices, elevated mortgage rates, and low housing inventory create significant obstacles for prospective homeowners.
Despite these challenges, most Americans still aspire to own a home. According to Bankrate's Home Affordability Report, nearly 4 in 5 Americans (78 percent) consider homeownership a part of the American Dream. However, affordability remains a major barrier, with common reasons for not buying including lack of income (56 percent), high home prices (47 percent), and inability to afford a down payment and closing costs (42 percent).
To compare the monthly costs of buying versus renting, Bankrate analyzed typical monthly mortgage payments and rents for homes in the 50 largest U.S. metro areas as of February 2024.
"Purchasing a home is a long-term commitment," said Skylar Olsen, Chief Economist at Zillow. "Home price appreciation has slowed considerably, and costs have risen dramatically since the days of 3 percent mortgage rates, so it’s going to take more time to break even on a purchase compared to renting."
Key insights from Bankrate’s Rent vs. Buy Study:
- Cheaper to Rent: It's more affordable to rent than to buy in all of the top 50 metro areas. The typical monthly mortgage payment for a median-priced home ($412,778, according to Redfin) in the U.S. is $2,703, while the national average rent is $1,979 — a 36.6 percent difference.
- Smallest Cost Differences: The five metros with the smallest cost differences between renting and buying are Detroit-Warren-Dearborn, MI (2%); Pittsburgh, PA (5.2%); Philadelphia-Camden-Wilmington, PA-NJ-DE-MD (8.7%); Cleveland-Elyria, OH (11.6%); and Buffalo-Cheektowaga, NY (20.2%).
- Largest Cost Differences: The five metros with the largest cost differences between renting and buying are San Francisco-Oakland-Berkeley, CA (180.7%); San Jose-Sunnyvale-Santa Clara, CA (162.3%); Seattle-Tacoma-Bellevue, WA (125%); Salt Lake City, UT (89%); and Austin-Round Rock-Georgetown, TX (86.5%).
- Significant Cost Gaps: In 21 U.S. metros, owning a home is at least 50 percent more expensive than renting.
Housing Market Trends
The analysis reflects broader housing market trends. Home prices are high, and while mortgage interest rates have decreased from their 2023 peaks, they remain relatively high. The national average for 30-year mortgages was 7.33 percent as of April 17, a 3 percentage point increase from March 2022, according to Bankrate’s survey of large lenders. The shortage of homes for sale partly explains why home prices remain elevated. According to Olsen, the monthly mortgage cost on a typical home purchased today is more than double that of one bought in 2019.
Renting isn’t necessarily cheap either. Zillow data shows that asking rents have risen in 47 of the 50 largest metro areas compared to a year ago, although not as rapidly as during the COVID-19 pandemic. Asking rents have increased nearly 30 percent from early 2020 to February 2024, based on Zillow’s Observed Rent Index (ZORI).
