Cost Gap Narrows Between Buying vs. Renting
Lower mortgage rates and moderating home prices are making purchasing a home over renting more tempting in several of the nation’s metros, according to realtor.com®’s newly released Rent vs. Buy report. While the gap is starting to narrow between buying and renting nationwide, it is still more expensive to purchase a home in the majority of larger metros than rent.
The median monthly cost to purchase a U.S. home was $1,600 in the fourth quarter of 2019, about 30% of the national median household income. Meanwhile, the median monthly rent was $1,319, which represents about 25% of the median household income.
The report analyzes the cost of buying versus renting in 593 counties across the U.S. in the fourth quarter of 2019. It’s cheaper to buy than rent in 16% of the counties tracked with populations of 100,000 or more—up from 12% a year earlier.
“The move toward a more balanced equation is good news for home sellers … as more people, especially the large cohort of millennials who turn 30 this year, begin to weigh the cost of buying versus renting,” says George Ratiu, realtor.com®’s senior economist. “Due to a combination of factors, we saw the monthly cost to buy a home fall 1 percent year over year, while rents increased 4 percent during the same time frame.”
Twenty-six of the 593 counties tracked moved from being more affordable to rent to being more affordable to buy over the past year. Some of those metros included Cleveland; Bronx County, N.Y.; Indianapolis; and Columbia, S.C.
In counties where buying a home was more affordable, list prices averaged 53% lower than the national median listing price of $300,000. Median rents were still lower but were only 11% cheaper, on average, according to realtor.com®’s analysis.
Among counties where renting is more affordable, median listing prices averaged 260% higher than the national median of $300,000.
Article by REALTOR® Magazine, January 29, 2020.