Realtor.com® July Rental Report: Renting Still Beats Buying in All of the Largest U.S. Metros

Rhea-AI Summary

Realtor.com®'s July Rental Report reveals that renting remains more affordable than buying in all 50 largest U.S. metros, a trend continuing since February. Elevated mortgage rates and high home prices contribute to over $1,000 in monthly savings by renting. The top metros with the highest rent-to-buy savings are Austin, TX, Seattle, WA, and Los Angeles, CA, with monthly savings of $2,120, $2,222, and $2,784, respectively. Despite overall rent declines for 12 consecutive months, the advantage of renting over buying is shrinking in some areas due to increasing affordable inventory. The report highlights that the monthly cost of buying a starter home is 61.3% higher than renting. However, this trend may change as affordable inventory continues to increase, easing the financial burden on first-time homebuyers.

Positive

• None.

Negative

• The renting advantage has shrunk in 23 of the top 50 markets, reducing rental savings.
• San Francisco, San Jose, Denver, Washington, and Miami saw the largest decrease in rent advantages, with reductions ranging from $563 to $273.

Insights

Financial Analyst

This report reveals significant financial implications for both the rental and housing markets. The 61.3% higher monthly cost of buying versus renting a starter home in the top 50 metros is a important data point. This substantial difference, amounting to $1,067 per month, strongly favors renting in the current market.

The trend of renting being more affordable than buying has expanded to all 50 largest metros, up from 47 last year. This shift is driven by elevated mortgage rates, high home prices and falling rents. The twelfth consecutive year-over-year rent decline for 0-2 bedroom properties is particularly noteworthy, indicating a sustained downward pressure on rental prices.

However, it's important to note that the advantage of renting over buying has narrowed by 2% compared to last year, primarily due to an influx of more affordable homes for sale. This trend, if continued, could gradually shift the market dynamics back towards favoring buying in some areas.

Real Estate Market Analyst

The report highlights significant regional variations in the rent-vs-buy equation. Austin, Texas stands out with a staggering 144.4% difference between buying and renting costs, resulting in a $2,120 monthly saving for renters. This extreme disparity suggests a potentially overheated housing market in Austin that may be due for a correction.

Interestingly, some traditionally expensive markets like San Francisco and San Jose are seeing the most significant narrowing of the rent advantage. This could indicate a rebalancing in these markets, possibly due to changing work patterns post-pandemic. The fact that 23 of the top 50 markets saw a diminishing rent advantage over the past 12 months suggests this trend may be widespread.

The report also notes an increase in smaller, more affordable homes for sale. This could be a response from developers to the affordability crisis, potentially leading to a more balanced market in the future. However, the persistence of the renting advantage across all major metros indicates that this shift is still in its early stages.

Economic Forecaster

The data presents a complex economic picture with potential long-term implications. The sustained advantage of renting over buying, now present in all 50 largest metros, could have significant impacts on wealth accumulation patterns. Traditionally, homeownership has been a key wealth-building tool for many Americans. If this trend continues, it may necessitate a reevaluation of financial planning strategies, particularly for younger generations.

However, the narrowing of the rent advantage in many markets, coupled with the influx of more affordable housing inventory, suggests we may be at an inflection point. The potential for mortgage relief, as mentioned in the report, could further shift the balance. This could lead to increased first-time home buying activity in the near future, potentially stimulating the housing market and broader economy.

The regional variations in these trends also highlight the importance of local economic factors. Cities like Memphis and Birmingham becoming rent-favoring markets over the last 12 months, partly due to increased investor activity, underscores the complex interplay between various economic actors in shaping local housing markets.

Top Three Metros Where Renting Beats Out Buying Include Austin-Round Rock-Georgetown, Texas with a $2120 Monthly Savings, Seattle-Tacoma-Bellevue, Wa. with a $2,222 Monthly Saving and Los Angeles-Long Beach-Anaheim, Calif. With a $2,784 Monthly Savings 

SANTA CLARA, Calif., Aug. 15, 2024 /PRNewswire/ -- As rents continue to fall in July, all 50 largest U.S. metros favor renting a starter home compared to buying, according to the Realtor.com^® Rental Report released today (see full list below). This continues a trend seen in February as elevated mortgage rates, high home prices and falling rents contribute to the over $1,000 savings in renting over buying. At the same time last year, 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," said 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 homebuyers, 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 homebuyers a path into their first home."

Additionally, this July marks the twelfth year-over-year rent decline in a row for 0–2-bedroom properties.

The top 10 metros with the largest rent versus buy savings (see below for top 50 metros):

1. Austin-Round Rock-Georgetown, Texas –buying cost 144.4% more than renting ($2,120 monthly rent savings)
2. Seattle-Tacoma-Bellevue, Wash. – 107.7% ($2,222)
3. Los Angeles-Long Beach-Anaheim, Calif. –99.5% ( $2,784)
4. Nashville-Davidson-Murfreesboro-Franklin, Tenn. –93.3% ($1,399)
5. Phoenix-Mesa-Chandler, Ariz. –91.6% ($1,396 )
6. Columbus, Ohio –91.3% ( $1,090 )
7. Dallas- Fort Worth-Arlington, Texas – 88.3% ($1,307)
8. San Francisco-Oakland-Berkeley, Calif. –88.2% ($2,442 )
9. New York-New Jersey-Jersey City, N.Y., N.J., Pa. –  81.1% ( $2,342)
10. Boston-Cambridge-Newton, Mass. –78.6% ($2,336)

Renting a starter home continues to be a more affordable option in all 50 metros
A common question potential first-time homebuyers face is whether it makes sense to continue renting or if it's time to make a home purchase, and one of the top considerations is the financial costs and benefits of renting versus owning. In July 2024, the cost of buying a starter home in the top 50 metros was $1,067 or 61.3% higher a month than renting one. This year, renting is a more affordable option than buying in all of the 50 largest metros, growing from last July, when only 47 metros saw rent as the more affordable option. Specifically, Memphis, Tenn., Birmingham, Ala., and Pittsburgh, Penn., were the three metros that flipped from buy-favoring to rent-favoring markets over the past 12 months.

Austin, Texas, where the monthly cost of buying a starter home was $3,558 – 144.4% more than the monthly rent of $1,468, for a monthly savings of $2,120 – topped the list of markets most favoring renting. Other top markets favoring renting over buying were Seattle, Los Angeles, San Francisco and New York. While Dallas, Texas and Columbus, Ohio have relatively lower buy cost, the affordable rental prices in these two markets propelled them to the top ten rent-favoring metros.

Change on the Horizon? The Advantage of Renting Shrank in Many Metros
Compared to last year, the advantage of renting shrank by 2 percentage points propelled by a greater influx of smaller and more affordable homes for sale leading to a slight decline in listing prices for starter homes. Last July, the average monthly cost of buying a starter home in the top 50 metros was 63.3% higher than renting, this July the cost of buying a starter home is 61.3%  higher than renting. Although the overall advantage of renting narrowed by 2 percentage points or $42 across the top 50 metros compared to a year ago, it was still $758 higher when compared to five years ago (pre-pandemic).

Over the past year 23 of the top 50 markets saw a diminishing rent advantage over the past 12 months and this advantage shrank the most in San Francisco, Calif. San Jose, Calif, Denver, Colo., Washington, D.C., and Miami, Fla. It is not surprising to see the rent advantage diminished most in these metros as homes in these markets experienced large listing price declines on a yearly basis.  

However, not every metro saw a diminishing advantage in renting. In fact Memphis, Tenn., and Birmingham, Ala. are two metros who became rent-favoring over the last 12 months, where we see  a large share of home buying activity from investors.

Top metros with diminishing advantage in renting (Dollar amount difference from July 2023 to July 2024)

1. San Francisco-Oakland-Berkeley, Calif. – -$563
2. San Jose-Sunnyvale-Santa Clara, Calif. – -$468
3. Denver-Aurora-Lakewood, Colo. – -$314
4. Washington-Arlington-Alexandria, D.C.-Va.-Md.-W.Va – -$282
5. Miami-Fort Lauderdale-Pompano Beach, Fla. – -$273

Top metros with increasing advantage in renting (Dollar amount difference from July 2023 to July 2024)

1. Memphis, Tenn.-Miss.-Ark. – $246
2. Birmingham-Hoover, Ala. – $209
3. New York-New Jersey-Jersey City, N.Y., N.J., Pa – $173
4. Los Angeles-Long Beach-Anaheim, Calif. – $156
5. Richmond - Va. – $130

Realtor.com®'s rent versus buy calculator can help consumers determine if the cost of homeownership is a better deal than renting based on their location and budget.

National Rental Data – July2024

Unit Size	Median Rent	Rent YoY	Rent Change – 5 years (July 2019)
Overall	$1,741	-0.7 %	19.8 %
Studio	$1,460	-0.9 %	15.1 %
1-bed	$1,615	-1.4 %	17.7 %
2-bed	$1,933	-0.6 %	21.7 %

Rental Data – 50 Largest Metropolitan Areas – July 2024

Metro	Median Rent	Monthly Buy Cost	$Difference (Buy-Rent)	% Difference (Buy-Rent)	Rent Cost: YY	Buy Cost: YY
Atlanta-Sandy Springs- Roswell, GA	$1,585	$2,497	$912	57.5 %	-6.1 %	-2.3 %
Austin-Round Rock, TX	$1,468	$3,588	$2,120	144.4 %	-10.2 %	-10.7 %
Baltimore-Columbia- Towson, MD	$1,807	$2,135	$328	18.2 %	-2.5 %	3.1 %
Birmingham-Hoover, AL	$1,305	$1,410	$105	8.0 %	0.5 %	18.0 %
Boston-Cambridge- Newton, MA-NH	$2,973	$5,309	$2,336	78.6 %	-2.5 %	-2.9 %
Buffalo-Cheektowaga- Niagara Falls, NY	$1,274	$2,168	$894	70.2 %	16.0 %	0.4 %
Charlotte-Concord- Gastonia, NC-SC	$1,516	$2,226	$710	46.8 %	-6.1 %	-2.8 %
Chicago-Naperville-Elgin, IL-IN-WI	$1,839	$2,719	$880	47.9 %	0.2 %	0.0 %
Cincinnati, OH-KY-IN	$1,389	$1,997	$608	43.8 %	2.9 %	-4.9 %
Cleveland-Elyria, OH	$1,214	$1,773	$559	46.0 %	0.1 %	6.6 %
Columbus, OH	$1,194	$2,284	$1,090	91.3 %	-1.9 %	-0.2 %
Dallas-Fort Worth- Arlington, TX	$1,481	$2,788	$1,307	88.3 %	-4.1 %	-5.9 %
Denver-Aurora- Lakewood, CO	$1,924	$3,199	$1,275	66.3 %	-1.5 %	-9.7 %
Detroit-Warren- Dearborn, MI	$1,339	$1,755	$416	31.1 %	2.2 %	8.7 %
Hartford-West Hartford- East Hartford, CT	$1,837	$2,514	$677	36.9 %	8.0 %	15.4 %
Houston-The Woodlands-Sugar Land, TX	$1,402	$2,442	$1,040	74.2 %	-2.2 %	-4.6 %
Indianapolis-Carmel-A nderson, IN	$1,324	$1,842	$518	39.1 %	1.1 %	0.4 %
Jacksonville, FL	$1,508	$2,440	$932	61.8 %	-5.0 %	-2.4 %
Kansas City, MO-KS	$1,347	$1,771	$424	31.5 %	1.2 %	1.6 %
Las Vegas-Henderson- Paradise, NV	$1,470	$2,318	$848	57.7 %	-3.9 %	0.5 %
Los Angeles-Long Beach-Anaheim, CA	$2,797	$5,581	$2,784	99.5 %	-1.8 %	1.9 %
Louisville/Jefferson County, KY-IN	$1,245	$1,706	$461	37.0 %	-2.8 %	3.6 %
Memphis, TN-MS-AR	$1,229	$1,439	$210	17.1 %	-3.9 %	15.8 %
Miami-Fort Lauderdale- West Palm Beach, FL	$2,368	$3,176	$808	34.1 %	-3.5 %	-10.1 %
Milwaukee-Waukesha- West Allis, WI	$1,717	$2,352	$635	37.0 %	3.5 %	1.3 %
Minneapolis-St. Paul- Bloomington, MN-WI	$1,559	$2,501	$942	60.4 %	4.4 %	-6.2 %
Nashville-Davidson– Murfreesboro–Franklin, TN	$1,500	$2,899	$1,399	93.3 %	-10.1 %	-1.8 %
New Orleans-Metairie, LA	$1,242	$2,383	$1,141	91.9 %	-4.0 %	0.8 %
New York-Newark- Jersey City, NY-NJ-PA	$2,887	$5,229	$2,342	81.1 %	0.4 %	3.6 %
Oklahoma City, OK	$1,014	$1,594	$580	57.2 %	-0.4 %	-13.1 %
Orlando-Kissimmee- Sanford, FL	$1,672	$2,211	$539	32.2 %	-4.8 %	-3.0 %
Philadelphia-Camden- Wilmington, PA-NJ-DE-MD	$1,823	$2,518	$695	38.1 %	-0.4 %	3.1 %
Phoenix-Mesa- Scottsdale, AZ	$1,524	$2,920	$1,396	91.6 %	-5.6 %	-1.4 %
Pittsburgh, PA	$1,484	$1,492	$8	0.5 %	2.7 %	4.3 %
Portland-Vancouver- Hillsboro, OR-WA	$1,748	$3,106	$1,358	77.7 %	3.9 %	-4.6 %
Providence-Warwick, RI- MA	$2,158	$3,340	$1,182	54.8 %	5.3 %	7.5 %
Raleigh, NC	$1,533	$2,622	$1,089	71.0 %	-3.6 %	0.3 %
Richmond, VA	$1,513	$2,486	$973	64.3 %	-2.8 %	3.6 %
Riverside-San Bernardino-Ontario, CA	$2,169	$3,246	$1,077	49.7 %	0.2 %	1.9 %
Rochester, NY	$1,385	$2,920	$1,535	110.8 %	7.9 %	4.0 %
Sacramento–Roseville– Arden-Arcade, CA	$2,023	$3,602	$1,579	78.1 %	8.3 %	-2.1 %
San Antonio-New Braunfels, TX	$1,232	$2,035	$803	65.2 %	-7.8 %	-11.9 %
San Diego-Carlsbad, CA	$2,919	$5,051	$2,132	73.0 %	-1.3 %	-4.4 %
San Francisco-Oakland- Hayward, CA	$2,770	$5,212	$2,442	88.2 %	-5.4 %	-12.1 %
San Jose-Sunnyvale- Santa Clara, CA	$3,390	$6,003	$2,613	77.1 %	4.1 %	-5.3 %
Seattle-Tacoma- Bellevue, WA	$2,064	$4,286	$2,222	107.7 %	0.6 %	-5.4 %
St. Louis, MO-IL	$1,327	$1,549	$222	16.7 %	-0.4 %	7.9 %
Tampa-St. Petersburg- Clearwater, FL	$1,746	$2,564	$818	46.8 %	-2.2 %	-5.8 %
Virginia Beach-Norfolk- Newport News, VA-NC	$1,560	$1,944	$384	24.6 %	4.4 %	-3.5 %
Washington-Arlington- Alexandria,DC-VA-MD- WV	$2,273	$3,261	$988	43.5 %	0.4 %	-7.7 %

Methodology
Rental data as of July 2024 for studio, 1-bedroom, or 2-bedroom units advertised as for-rent on Realtor.com®. Rental units include apartments as well as private rentals (condos, townhomes, single-family homes). We use rental sources that reliably report data each month within the top 50 largest metropolitan areas. Realtor.com® began publishing regular monthly rental trends reports in October 2020 with data history stretching back to March 2019.

The monthly cost of buying a home was calculated by averaging the median listing prices of studio, 1-bed, and 2-bed homes, weighted by the number of listings, in each housing market. Monthly buying costs assume a 8% down payment, with a mortgage rate of 6.85%, and include taxes, insurance and HOA fees.

With the release of its July 2024 rent report, Realtor.com® incorporated a new and improved methodology for capturing and reporting more comprehensive rental listing trends and metrics. The new methodology is expected to yield a cleaner, more representative and more consistent measurement of rental listings and trends at both the national and local level. The methodology has been adjusted to better represent the true cost of primary housing for renters. Most areas across the country will see minor changes with a smaller handful of areas seeing larger updates. As a result of these changes, the rental data released since July 2024 will not be directly comparable with previous releases and Realtor.com® economics blog posts. However, future data releases, including historical data, will consistently apply the new methodology.

About Realtor.com^®
Realtor.com^® is an open real estate marketplace built for everyone. Realtor.com^® pioneered the world of digital real estate more than 25 years ago. Today, through its website and mobile apps, Realtor.com^® is a trusted guide for consumers, empowering more people to find their way home by breaking down barriers, helping them make the right connections, and creating confidence through expert insights and guidance. For professionals, Realtor.com^® is a trusted partner for business growth, offering consumer connections and branding solutions that help them succeed in today's on-demand world. Realtor.com^® is operated by News Corp [Nasdaq: NWS, NWSA] [ASX: NWS, NWSLV] subsidiary Move, Inc. For more information, visit Realtor.com^®.

Media Contact: Mallory Micetich, press@realtor.com

View original content:https://www.prnewswire.com/news-releases/realtorcom-july-rental-report-renting-still-beats-buying-in-all-of-the-largest-us-metros-302222800.html

SOURCE Realtor.com

FAQ

Why is renting more affordable than buying in all major U.S. metros in July 2024?

Due to elevated mortgage rates, high home prices, and falling rents, renting saves over $1,000 per month compared to buying.

Which metros offer the highest savings by renting over buying?

The top metros are Austin, TX ($2,120), Seattle, WA ($2,222), and Los Angeles, CA ($2,784).

How has the renting advantage changed in the past year?

The renting advantage has decreased by 2 percentage points across the top 50 metros due to more affordable homes entering the market.

What is the national median rent for different unit sizes in July 2024?

The median rent is $1,741 overall, with studios at $1,460, 1-bedrooms at $1,615, and 2-bedrooms at $1,933.

Which metros saw the most significant decrease in rental advantage?

San Francisco, San Jose, Denver, Washington, and Miami have seen the largest decreases, with reductions ranging from $563 to $273.