All 50 of the largest metros favored renting a starter home over buying one last month, according to the Realtor.com Rental Report.
As rents continued to fall in July, the trend of high mortgage rates and home prices contributes to over $1,000 in savings to rent versus buy. In July 2023, only 47 metros favored renting.
"For every major U.S. metro, renting a starter home continues to be more affordable than buying a starter home, continuing a trend we saw this February as rents declined and home prices continued to grow," says Ralph McLaughlin, senior economist at Realtor.com.
"However, we are starting to see the advantage of renting over buying decrease across several metros, especially as more affordable inventory hits the market. It has been a challenging time for potential first-time home buyers, especially as rents have been so favorable, but with mortgage relief finally on the way, we might continue to see the advantage of renting shrink, giving home buyers a path into their first home."
This July marks the 12th year-over-year rent decline in a row for zero to two-bedroom properties. In keeping with the rent decline, the cost of buying a starter home in the top 50 metros was $1,067 or 61.3% higher a month than renting one.
The largest rent versus buy savings were seen in:
- Austin-Round Rock-Georgetown, Texas: buying costs 144.4% more than renting ($2,120 monthly rent savings)
- Seattle-Tacoma-Bellevue, Washington: 107.7% or $2,222
- Los Angeles-Long Beach-Anaheim, California: 99.5% or $2,784
- Nashville-Davidson-Murfreesboro-Franklin, Tennessee: 93.3% or $1,399
- Phoenix-Mesa-Chandler, Arizona: 91.6% or $1,396
- Columbus, Ohio: 91.3% or $1,090
- Dallas- Fort Worth-Arlington, Texas: 88.3% or $1,307
- San Francisco-Oakland-Berkeley, California: 88.2% or $2,442
- New York-New Jersey-Jersey City, New York, New Jersey, Pennsylvania: 81.1% or $2,342
- Boston-Cambridge-Newton, Massachusetts: 78.6% or $2,336
While Dallas and Columbus have relatively lower buy costs than other metros, the affordable rental prices in these two markets propelled them to the top 10 rent-favoring metros.
The advantage of renting fell by 2 percentage points last month compared with last year. This shrinkage was propelled by a greater influx of smaller and more affordable homes for sale leading to a slight decline in starter home list prices.
In July 2023, the average monthly cost of buying a starter home in the top 50 metros was 63.3% higher than renting, the cost of buying a starter home is 61.3% higher than renting this year. While the overall advantage of renting narrowed to $42 across the top 50 metros compared with a year ago, it is still $758 higher when compared with 2019.
Twenty-three of the top 50 markets saw a weakening rent advantage over the past 12 months. The advantage fell the most in San Francisco; San Jose, California; Denver; Washington, D.C.; and Miami.
In contrast, Memphis, Tennessee, and Birmingham, Alabama, are two metros that became rent-favoring over the last 12 months.
