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Rent vs Buy: Buying a Home is Cheaper in Growing Number of Cities

Highlights

  • The monthly cost to purchase the median home in the 50 largest metros was $1,988 in January 2021, compared to the median monthly rent of $1,727.
  • On average, buying the median priced home accounted for 32% of a metro’s median income in January, while renting accounted for 27%.
  • Buying a home was the same or more affordable than renting in 15 of the 50 largest metros analyzed in January, up from 13 markets a year ago.
  • Top areas where buying is more affordable than renting include 
    • Cleveland-Elyria, OH
    • Chicago-Naperville-Elgin, IL-IN-WI
    • Pittsburgh, PA
    • Riverside-San Bernardino-Ontario, CA
    • Miami-Fort Lauderdale-West Palm Beach, FL

Renters looking to change their living situation–especially those thinking about becoming first time homebuyers–may be happy to see that the number of cities that favor buying over renting is increasing.

In our rent vs buy analysis, for each metro area, we compared the monthly cost* of buying a home for the median listing price against the median monthly rent of two- to four-bedroom units in the area.

The monthly cost of buying a home is the same or more affordable than renting in 15 of the 50 largest metros, up from 13 markets a year ago. Moreover, there are several “borderline” markets where the monthly cost of buying a home is within 5% of the cost of the median rent in the area.

In January 2021, the monthly cost to buy the median-priced home in the 50 largest metros was $1,988 or 32% of each metro’s median household income, on average. This is slightly above the upper limit of the budgeting rule of thumb of spending no more than 30% of gross income on housing costs. (See how a similar budgeting rule plays out with your numbers in our home affordability calculator.) 

However, the monthly cost to buy is up only 0.2% from the same time last year when it was $1,983. Meanwhile, the cost to rent increased by 2.4% year-over-year, from $1,696 to $1,727.

Despite the historic growth in home prices over the past year, the monthly cost of buying in the 50 largest metros has remained essentially unchanged, thanks to low mortgage rates, which dropped 102 basis points from a year ago to 2.88% in January. In the wake of the pandemic, mortgage rates dropped to historic lows, making it cheaper to borrow money, which put a little money back into homebuyers’ pockets, offsetting the increased cost of more expensive homes. Ultimately, while the median listing price of homes in the 50 largest metros has increased by 10.9% on average, the monthly housing costs have only increased by 0.2%.

Where is purchasing a home favored?

In the 10 metros below, the difference between the monthly cost to buy a home and rent a home most strongly favored buying in January. Median listing prices in these metros were on average 7.7% lower than the national median listing price of $346,000 while rents were 0.7% greater than the top-50 average. The monthly cost of buying in these metros dropped 0.2% compared to last year, while rents have risen 4.9% during that same period. The end result is that those who buy in these metros are able to save an average of 11% in monthly costs compared to renters.

Rent vs Buy – Top 10 Markets that Favor Buying

Rank Metro Median Listing Price Buy (monthly) Rent Buy Percent of Income Rent Percent of Income
1 Cleveland-Elyria, OH $198,000 $967 $1,195 19% 23%
2 Chicago-Naperville-Elgin, IL-IN-WI $338,000 $1,691 $1,975 26% 31%
3 Pittsburgh, PA $245,000 $1,250 $1,445 23% 27%
4 Riverside-San Bernardino-Ontario, CA $485,000 $2,224 $2,536 37% 43%
5 Miami-Fort Lauderdale-West Palm Beach, FL $400,000 $2,092 $2,350 40% 45%
6 New Orleans-Metairie, LA $320,000 $1,401 $1,545 31% 35%
7 Baltimore-Columbia-Towson, MD $325,000 $1,561 $1,693 21% 23%
8 Tampa-St. Petersburg-Clearwater, FL $302,000 $1,494 $1,605 30% 32%
9 Hartford-West Hartford-East Hartford, CT $303,000 $1,589 $1,700 23% 25%
10 Detroit-Warren-Dearborn, MI $265,000 $1,277 $1,350 23% 25%

 

Where is renting a home favored?

Median listing prices in these metros were on average 105% higher than the national median listing price of $346,000–more than double. Rents in these markets are higher, too, but just 86.7% higher than the top-50 average. Renters in these metros save an average of 30% in monthly costs compared to buyers. Many of these markets represent tech hubs, which have seen rents plummet in response to the pandemic. With working from home becoming a more viable option for workers in these areas, many have elected to leave these urban centers for more affordable options elsewhere.

Rent vs Buy – Top 10 Markets that Favor Renting

Rank Metro Median Listing Price Buy (monthly) Rent Buy Percent of Income Rent Percent of Income
1 San Jose-Sunnyvale-Santa Clara, CA $1,199,000 $5,548 $3,200 49% 28%
2 Austin-Round Rock, TX $460,000 $2,467 $1,615 35% 23%
3 Sacramento–Roseville–Arden-Arcade, CA $599,000 $2,639 $1,810 40% 27%
4 Seattle-Tacoma-Bellevue, WA $665,000 $2,975 $2,067 37% 26%
5 San Francisco-Oakland-Hayward, CA $990,000 $4,660 $3,278 47% 33%
6 Los Angeles-Long Beach-Anaheim, CA $1,150,000 $4,875 $3,433 73% 52%
7 San Diego-Carlsbad, CA $850,000 $3,775 $2,675 53% 37%
8 Portland-Vancouver-Hillsboro, OR-WA $525,000 $2,382 $1,695 34% 24%
9 Oklahoma City, OK $278,000 $1,259 $945 25% 19%
10 Richmond, VA $388,000 $1,671 $1,300 27% 21%

 


Rent vs Buy – All Markets that Favor Buying

Metro Median Listing Price Buy (monthly) Rent Buy Percent of Income Rent Percent of Income
Baltimore-Columbia-Towson, MD $325,000 $1,561 $1,693 21% 23%
Chicago-Naperville-Elgin, IL-IN-WI $338,000 $1,691 $1,975 26% 31%
Cleveland-Elyria, OH $198,000 $967 $1,195 19% 23%
Detroit-Warren-Dearborn, MI $265,000 $1,277 $1,350 23% 25%
Hartford-West Hartford-East Hartford, CT $303,000 $1,589 $1,700 23% 25%
Indianapolis-Carmel-Anderson, IN $279,000 $1,190 $1,199 22% 22%
Louisville/Jefferson County, KY-IN $250,000 $1,085 $1,100 20% 20%
Miami-Fort Lauderdale-West Palm Beach, FL $400,000 $2,092 $2,350 40% 45%
Minneapolis-St. Paul-Bloomington, MN-WI $370,000 $1,681 $1,705 23% 24%
New Orleans-Metairie, LA $320,000 $1,401 $1,545 31% 35%
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD $328,000 $1,752 $1,800 28% 29%
Pittsburgh, PA $245,000 $1,250 $1,445 23% 27%
Riverside-San Bernardino-Ontario, CA $485,000 $2,224 $2,536 37% 43%
St. Louis, MO-IL $250,000 $1,167 $1,209 20% 21%
Tampa-St. Petersburg-Clearwater, FL $302,000 $1,494 $1,605 30% 32%

 

“Borderline” Markets – Monthly buying costs within 5% of renting costs

Metro Median Listing Price Buy (monthly) Rent Buy Percent of Income Rent Percent of Income
Atlanta-Sandy Springs-Roswell, GA $365,000 $1,617 $1,607 26% 26%
Birmingham-Hoover, AL $264,000 $1,105 $1,081 21% 21%
Buffalo-Cheektowaga-Niagara Falls, NY $240,000 $1,336 $1,280 26% 24%
Las Vegas-Henderson-Paradise, NV $345,000 $1,540 $1,463 29% 28%
Memphis, TN-MS-AR $244,000 $1,137 $1,089 25% 24%
Milwaukee-Waukesha-West Allis, WI $320,000 $1,612 $1,525 29% 27%
Orlando-Kissimmee-Sanford, FL $320,000 $1,567 $1,550 29% 29%
Phoenix-Mesa-Scottsdale, AZ $455,000 $1,915 $1,858 32% 31%
Washington-Arlington-Alexandria, DC-VA-MD-WV $500,000 $2,307 $2,200 25% 24%

 

Methodology

*Purchase and rent costs reflect current costs and do not take into account holding period, price and rent appreciation, and inflation. Purchase costs are based on purchasing with a 30-year fixed-rate, fully amortizing mortgage of 80% (20% down payment), and do include taxes and insurance and are calculated based on realtor.com metro-level residential listing price data and Optimal Blue mortgage rate data for January 2021. Rental prices include data from apartment communities as well as private rentals (condos, townhomes, single-family homes) listed on realtor.com. All rental units were 2- to 4-bedrooms in size so as to be somewhat comparable to the typical home purchase. Homebuyer surveys show that the typical home purchase has 3 bedrooms. Household income data is from 2021 Claritas estimates are based on Census data. Only the 50 largest metros (ranked by number of households) were included in this analysis.



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