These are the 10 best cities for apartment dwellers as mortgage rates stay oppressively high — and the 3 housing markets where buying a home is actually cheaper than renting
- Renting is generally cheaper than buying in the 50 biggest US cities, Realtor.com noted.
- Rent growth remained negative in August, even as lofty mortgage rates complicate buying for many.
- Here are the 10 best cities for renters, and three places for hopeful homebuyers to look now.
According to Realtor.com, lower rent prices and multi-decade-high mortgage rates make it smarter to rent than buy in most major US cities right now.
Rent from 2022 fell for the fourth consecutive month in August, according to a September report from the firm. The median asking price for a two-bedroom apartment in one of the top 50 US markets fell 0.6% in late summer, though this was less severe than July’s 1% drop.
“Seasonality and recent rental market momentum make it very unlikely that the market will see a new peak rent in 2023,” Realtor.com‘s Jiayi Xu and Danielle Hale wrote in the report.
Landlords charged a median monthly rent of $1,752 in those big cities, which Xu and Hale noted was $7 less than the previous month and $25 less than the peak in July 2022. However, compared to pre-pandemic levels, apartments cost $336 more per month, or approximately 24% more.
These findings are consistent with a recent report from online rental platform Zumper, which discovered that rent growth has slowed significantly in the last year. However, Zumper’s data for the top 100 US real estate markets shows that rents are at an all-time high and are still rising, albeit slowly, whereas Realtor.com reported that rent has turned negative in the country’s largest markets.
Why renting is still probably preferable to buying
Whether rents are at all-time highs or just below them, it’s clear that apartment living isn’t cheap.
However, according to Realtor.com‘s researchers, buying is not a better option for the majority of Americans. Mortgage rates are at their highest in over 20 years, and a lack of housing supply has kept home prices from falling. As a result, there appears to be no end in sight to the affordability crisis.
In 94% of the country’s 50 largest metropolitan areas, renting a starter home is less expensive than buying one. Xu and Hale collaborated on this piece. The average starter home costs $2,959, which is nearly $1,200 more than the median rent of $1,776.
Disparities between buying and renting resulted from a difference in how median costs changed in the previous year. The median price of a starter home for buyers with a 7% down payment increased 21.4% year over year as mortgage rates rose, while renters saw a 0.5% decrease, according to the report. Homeowners’ association fees, insurance, and taxes were all factored in.
“The advantage of renting became more pronounced in all rent-favoring markets,” the authors write. “The monthly savings from renting in rent-favoring markets were $483 higher compared to the prior year.”
According to Realtor.com, there were three cities in August where buying was actually cheaper than renting: Memphis, Tennessee; Pittsburgh, Pennsylvania; and Birmingham, Alabama. It was $43, $39, and $6 per month less expensive to buy in those cities, respectively. In comparison to last year, rents in the three cities fell or rose slightly, while purchasing costs increased by 11.2% to 38.4%.
10 best metropolitan areas for renters
Realtor.com highlighted the ten largest US real estate markets where renting an apartment over buying a home saves the most money.
“These rent-favoring metros are mostly markets with a higher concentration of tech workers and high earners, where both the average rent-cost and buy-cost are higher than the national average,” Xu and Hale wrote of the cities on the list.
The ten metro areas where renting makes more sense than buying right now are listed below, along with the median rent, median monthly cost of buying and how it compares to renting, and year-over-year changes for renting and buying.
1. Austin-Round Rock-Georgetown, Texas
Median rent: $1,670
Median monthly cost to buy: $3,946
Median monthly cost of buying vs renting: $2,276 (136.3% higher)
Year-over-year rent change: -8%
Year-over-year buy change: 9.2%
Source: Realtor.com
2. San Francisco-Oakland-Berkeley, California
Median rent: $2,906
Median monthly cost to buy: $5,859
Median monthly cost of buying vs renting: $2,953 (101.6% higher)
Year-over-year rent change: -4.9%
Year-over-year buy change: 12.7%
Source: Realtor.com
3. Columbus, Ohio
Median rent: $1,222
Median monthly cost to buy: $2,458
Median monthly cost of buying vs renting: $1,236 (101.1% higher)
Year-over-year rent change: 2.7%
Year-over-year buy change: 35.1%
Source: Realtor.com
4. Sacramento-Roseville-Folsom, California
Median rent: $1,898
Median monthly cost to buy: $3,779
Median monthly cost of buying vs renting: $1,881 (99.1% higher)
Year-over-year rent change: -3.9%
Year-over-year buy change: 29.9%
Source: Realtor.com
5. Los Angeles-Long Beach-Anaheim, California
Median rent: $2,892
Median monthly cost to buy: $5,672
Median monthly cost of buying vs renting: $2,780 (96.1% higher)
Year-over-year rent change: -2.3%
Year-over-year buy change: 23.3%
Source: Realtor.com
6. San Jose-Sunnyvale-Santa Clara, California
Median rent: $3,367
Median monthly cost to buy: $6,581
Median monthly cost of buying vs renting: $3,214 (95.5% higher)
Year-over-year rent change: -0.2%
Year-over-year buy change: 23.3%
Source: Realtor.com
7. Portland-Vancouver-Hillsboro, Oregon-Washington
Median rent: $1,709
Median monthly cost to buy: $3,314
Median monthly cost of buying vs renting: $1,605 (93.9% higher)
Year-over-year rent change: -5.2%
Year-over-year buy change: 13.8%
Source: Realtor.com
8. Boston-Cambridge-Newton, Massachusetts-New Hampshire
Median rent: $2,851
Median monthly cost to buy: $5,526
Median monthly cost of buying vs renting: $2,675 (93.8% higher)
Year-over-year rent change: 3.2%
Year-over-year buy change: 24.4%
Source: Realtor.com
9. Seattle-Tacoma-Bellevue, Washington
Median rent: $2,168
Median monthly cost to buy: $4,156
Median monthly cost of buying vs renting: $1,988 (91.7% higher)
Year-over-year rent change: -3.7%
Year-over-year buy change: 21%
Source: Realtor.com
10. Phoenix-Mesa-Chandler, Arizona
Median rent: $1,595
Median monthly cost to buy: $3,015
Median monthly cost of buying vs renting: $1,420 (89% higher)
Year-over-year rent change: -4.5%
Year-over-year buy change: 17.7%
Source: Realtor.com
