Realtor.com® January Rental Report: Buying a Starter Home is More Affordable than Renting in Over Half of the Largest U.S. Metros

Rhea-AI Summary

New data from Realtor.com's Monthly Rental Report indicates that renting is becoming increasingly expensive, with a 19.8% year-over-year increase in the U.S. median rental price to $1,789 in January. In contrast, in 26 of the 50 largest metros, the monthly cost of buying a starter home is 20.6% lower than renting. Birmingham, Cleveland, and Pittsburgh lead in affordability for first-time buyers. However, rising mortgage rates and limited inventory in competitive housing markets continue to challenge potential buyers.

Positive

• In January, buying a starter home was 20.6% cheaper than renting in 26 of the 50 largest metros.
• Median listing price for a starter home was $295,360, lower than the overall median of $375,000.
• Birmingham, Ala. shows a -44.3% difference in costs favoring buying over renting.

Negative

• The monthly cost of buying a starter home was slightly higher than renting at the national level, averaging $1,867 vs $1,789.
• Rising mortgage rates may deter first-time buyers.

SANTA CLARA, Calif., Feb. 22, 2022 /PRNewswire/ -- As housing affordability issues rise across the biggest U.S. markets, new data suggests many renters who make the transition to first-time buying could save on monthly payments, according to the Realtor.com^® Monthly Rental Report released today. In January, the monthly cost of buying a starter home¹ was more affordable than renting a similar-sized unit in 26 of the 50 largest metros, led by secondary cities like Birmingham, Ala., Cleveland and Pittsburgh.

With buying conditions remaining competitive nationwide, potential monthly starter home savings are largely attributed to skyrocketing rents. In January, the U.S. median rental price increased by double-digits for the eighth straight month, up 19.8% year-over-year. Compared to growth in the monthly cost of buying a home with up to two-bedrooms (+11.0% year-over-year), all rental unit sizes posted higher yearly gains in January: Studios, up 21.0% ($256); 1-bedrooms, up 19.2% ($266); and 2-bedrooms, up 19.2% ($323).

"U.S. rental markets are more than making up for lost time, with January data showing national rents continued to surge by double-digits over last year – and at a faster pace than for-sale home prices. So much faster, in fact, that even as monthly starter home costs increased in many of the markets that favored buying, rents for a similar-sized unit were 20% higher," said Realtor.com^® Chief Economist Danielle Hale. "While both rental and homebuying costs are rising, a number of factors could tip the affordability scale in favor of first-time buying for many Americans this year. Rents are forecasted to outpace listing price growth in 2022 and are already accelerating across all unit sizes. Additionally, survey data shows the majority of landlords plan to raise rental asking prices this year. But the buy-versus-rent decision ultimately depends on personal circumstances like where you live, your financial situation and how long you want to live in your next home. As mortgage rates continue climbing, those looking to buy their first home in 2022 are more likely to find lower costs now than later in the year, but home selection is expected to improve as we move toward spring, when many homeowners target listing their home for sale."

January 2022 Rental Metrics – National

Unit Size	Median Rent	Change over Jan. 2021	Change over Jan. 2020
Overall	$1,789	19.8%	21.0%
Studio	$1,476	21.0%	14.6%
1-bed	$1,652	19.2%	20.2%
2-bed	$2,000	19.2%	23.8%

Buy Over Rent: First-time buying budgets stretch further in secondary metros

January data indicates that surging rents are increasingly driving relative affordability in the starter home buying market, despite rising listing prices and mortgage rates. More than half of the 50 largest U.S. metros favored buying in January and the gap between monthly starter home costs and rents in these areas was higher than last summer. Many of the top buying markets are relatively affordable secondary metros that are attracting remote workers from expensive big tech cities, including first-time buyers like millennials. Now that downtown offices are reopening, workers with continued flexibility could be facing relatively less competition in the top markets that favored starter home buying in January. 

• Across the 50 biggest U.S. metros in January, the median listing price for a starter home ($295,360) was lower than the median overall ($375,000). However, factoring in costs like mortgage rates and HOA fees, monthly starter home costs ($1,867) were slightly higher than rents at the national level ($1,789).
• In 26 of the 50 largest markets, the monthly cost of buying a starter home was an average of 20.6% ($323) lower than renting one in January.
• On average, the January difference between monthly starter home costs and rents was even greater in the top 10 markets that favored buying (-32.6%), led by: Birmingham, Ala. (-44.3%), Cleveland (-38.9%), Pittsburgh (-38.3%) and St. Louis (-37.3%). Two of these markets – Tampa (+37.5%) and Orlando (+34.8%) – were among Sun Belt metros that saw January's fastest annual rent growth (see table below).
• Illustrating overall declining affordability, both the monthly cost of buying a starter home and renting one increased in eight of the top 10 markets that favored buying in January, including Tampa at No. 9. Even so, as over one-third (38.1%) of Tampa's recent home shoppers came to the area from relatively expensive regions like the northeast, the metro offered lower monthly starter home buying costs ($1,543) than a big tech city like New York in January ($4,115).

Top 10 Metro Areas that Favor Buying a Starter Home Over Renting One (Jan. 2022)

Rank	Metro	% Difference (Buy-Rent)	$ Difference (Buy-Rent)	Buy Cost per Month	Buy Cost Y/Y	Median Rent per Month	Rent Y/Y
1	Birmingham, Ala.	-44.3%	-$533	$668	-5.9%	$1,201	18.6%
2	Cleveland, Ohio	-38.9%	-$516	$809	13.5%	$1,325	9.1%
3	Pittsburgh, Penn.	-38.3%	-$585	$945	3.2%	$1,530	18.6%
4	St. Louis, Mo.	-37.3%	-$483	$812	16.2%	$1,295	19.5%
5	Detroit, Mich.	-33.3%	-$449	$901	-10.1%	$1,350	10.1%
6	Baltimore, Md.	-30.0%	-$531	$1,242	5.2%	$1,773	14.4%
7	Virginia Beach, Va.	-27.2%	-$409	$1,091	14.6%	$1,500	16.7%
8	Orlando, Fla.	-27.1%	-$493	$1,327	21.8%	$1,820	34.8%
9	Tampa, Fla.	-25.5%	-$527	$1,543	27.3%	$2,070	37.5%
10	Louisville, Ky.	-23.7%	-$284	$916	8.5%	$1,200	17.1%

Rent Over Buy: Big tech cities offer relatively affordable rents and flexibility
Big tech cities, where real estate typically comes at a premium, dominated January's top markets that favored renting over buying a starter home. In these markets, rents have been making a strong comeback from their 2021 slowdown, partly driven by higher rent growth among studios common to big tech cities than larger units. Still, as first-time buyers face particularly limited inventory and expensive asking prices in big tech cities, renting continues to present a more affordable option. Additionally, for-sale inventory in major tech hubs typically includes a relatively high share of condos, which often come with a hefty HOA fee that can drive up monthly homeownership costs.

• In January, the monthly cost of buying was 24.8% ($536) higher than the cost of renting in 24 of the 50 largest metros, on average.
• In the top 10 metros that favored renting, eight of which were among the biggest U.S. tech cities, monthly starter home buying costs payments were 41.6% ($978) higher than rents. For-sale starter homes in these top 10 markets included a higher average share of condos (78%) than the national rate (55%) and pricier HOA fees (at $494 vs. $278).
• With 76.1% ($1,346) higher monthly starter home buying costs than rents, Austin, Texas topped the January list of markets that favored renting (see table below).
• At No. 7, Denver had 34.0% higher monthly starter home costs in January, despite significant annual rent growth (+18.7%). With out-of-state home shoppers accounting for more than one-third (35.6%) of Denver traffic, renting could be a relatively affordable alternative for transplant first-time buyers still searching for a home in their budget. January data shows the Denver rental share of income (21.7%) is relatively more affordable than in a city like Los Angeles (45.9%).

"Deciding when to transition from renting to first-time buying is largely dependent on stage of life. For young Americans like Gen Z who may have moved home to save money during COVID, renting in a big tech city offers flexibility and relative affordability even as rents recover in these areas. But for the 45 million millennials at the first-time buying stage of life, priorities may have shifted towards settling down and building wealth," Hale added. "With mortgage rates getting higher, living somewhere that offers relatively affordable for-sale home options is key, as the general rule of thumb is to not spend more than 30% of your income on housing costs. Renters considering the transition to buying their first home can get a better sense of the financial components by using tools like Realtor.com^®'s Rent Vs. Buy Calculator."

Top 10 Metro Areas that Favor Renting a Starter Home Over Buying One (Jan. 2022)

Rank	Metro	% Difference (Buy-Rent)	$ Difference (Buy-Rent)	Buy Cost per Month	Buy Cost Y/Y	Median Rent per Month	Rent Y/Y
1	Austin, Texas	76.1%	$1,346	$3,115	25.7%	$1,769	31.0%
2	New York, N.Y.	52.4%	$1,415	$4,115	18.2%	$2,700	9.1%
3	San Francisco, Calif.	49.1%	$1,461	$4,436	4.4%	$2,975	12.0%
4	San Jose, Calif.	48.3%	$1,479	$4,541	13.4%	$3,062	14.3%
5	Seattle, Wash.	39.4%	$822	$2,908	-3.6%	$2,086	19.5%
6	Boston, Mass.	37.5%	$1,048	$3,843	17.4%	$2,795	24.2%
7	Denver, Colo.	34.0%	$645	$2,540	33.3%	$1,895	18.7%
8	Rochester, N.Y.	28.5%	$360	$1,624	-15.0%	$1,264	10.0%
9	Portland, Ore.	25.5%	$443	$2,176	13.8%	$1,733	15.5%
10	Los Angeles, Calif.	25.5%	$760	$3,742	2.5%	$2,982	19.5%

January 2022 Rental Metrics – 50 Largest U.S. Metros

Metropolitan Statistical Area	Overall Median Rent	Overall Rent Y/Y	Studio Median Rent	Studio Rent Y/Y	1-Bed Median Rent	1-Bed Rent Y/Y	2-Bed Median Rent	2-Bed Rent Y/Y
Atlanta-Sandy Springs-Roswell, Ga.	$1,814	21.7%	$1,664	22.8%	$1,689	23.3%	$2,003	20.8%
Austin-Round Rock, Texas	$1,769	31.0%	$1,485	34.9%	$1,615	31.8%	$1,932	28.0%
Baltimore-Columbia-Towson, Md.	$1,773	14.4%	$1,600	28.0%	$1,699	14.0%	$1,873	13.5%
Birmingham-Hoover, Ala.	$1,201	18.6%	$1,066	3.8%	$1,139	14.7%	$1,261	23.0%
Boston-Cambridge-Newton, Mass.-N.H.	$2,795	24.2%	$2,527	35.1%	$2,600	23.8%	$3,040	21.6%
Buffalo-Cheektowaga-Niagara Falls, N.Y.	$1,365	23.3%	$1,095	36.9%	$1,225	20.1%	$1,490	15.1%
Charlotte-Concord-Gastonia, N.C.-S.C.	$1,619	21.8%	$1,489	24.2%	$1,500	20.5%	$1,755	18.3%
Chicago-Naperville-Elgin, Ill.-Ind.-Wis.	$1,800	9.2%	$1,350	8.0%	$1,800	13.8%	$1,995	5.0%
Cincinnati, Ohio-Ky.-Ind.	$1,395	13.3%	$1,130	12.8%	$1,350	16.2%	$1,549	15.6%
Cleveland-Elyria, Ohio	$1,325	9.1%	$946	15.8%	$1,275	11.4%	$1,450	8.2%
Columbus, Ohio	$1,249	16.1%	$1,009	12.7%	$1,150	15.6%	$1,375	18.0%
Dallas-Fort Worth-Arlington, Texas	$1,615	24.9%	$1,376	26.4%	$1,479	27.4%	$1,900	25.1%
Denver-Aurora-Lakewood, Colo.	$1,895	18.7%	$1,604	18.1%	$1,778	19.7%	$2,178	18.5%
Detroit-Warren-Dearborn, Mich.	$1,350	10.1%	$1,075	8.6%	$1,150	12.4%	$1,499	11.4%
Hartford-West Hartford-East Hartford, Conn.	$1,673	16.6%	$1,412	31.0%	$1,500	10.4%	$1,900	18.8%
Houston-The Woodlands-Sugar Land, Texas	$1,399	16.1%	$1,265	14.6%	$1,274	16.8%	$1,583	17.3%
Indianapolis-Carmel-Anderson, Ind.	$1,204	13.2%	$1,032	14.7%	$1,094	8.2%	$1,355	16.4%
Jacksonville, Fla.	$1,612	32.1%	$1,390	68.5%	$1,498	30.9%	$1,749	34.5%
Kansas City, Mo.-Kan.	$1,220	13.6%	$995	11.2%	$1,090	14.7%	$1,435	13.1%
Las Vegas-Henderson-Paradise, Nev.	$1,644	30.0%	$1,223	22.9%	$1,510	31.3%	$1,750	29.6%
Los Angeles-Long Beach-Anaheim, Calif.	$2,982	19.5%	$2,250	23.3%	$2,706	21.9%	$3,450	17.1%
Louisville/Jefferson County, Ky.-Ind.	$1,200	17.1%	$1,000	8.1%	$1,100	11.7%	$1,379	22.6%
Memphis, Tenn.-Miss.-Ark.	$1,385	26.5%	$1,126	15.1%	$1,349	25.7%	$1,499	30.7%
Miami-Fort Lauderdale-West Palm Beach, Fla.	$2,895	52.4%	$2,374	50.7%	$2,555	50.3%	$3,292	49.6%
Milwaukee-Waukesha-West Allis, Wis.	$1,545	12.6%	$1,195	7.7%	$1,420	9.7%	$1,795	15.8%
Minneapolis-St. Paul-Bloomington, Minn.-Wis.	$1,555	7.2%	$1,211	4.4%	$1,465	5.8%	$1,899	9.8%
Nashville-Davidson--Murfreesboro--Franklin, Tenn.	$1,685	24.4%	$1,630	20.3%	$1,595	24.2%	$1,799	25.3%
New Orleans-Metairie, La.	$1,763	17.5%	$1,215	-2.8%	$1,530	6.6%	$2,000	11.4%
New York-Newark-Jersey City, N.Y.-N.J.-Pa.	$2,700	9.1%	$2,432	21.6%	$2,485	6.3%	$2,980	5.7%
Oklahoma City, Okla.	$923	11.2%	$800	16.8%	$865	14.0%	$995	11.2%
Orlando-Kissimmee-Sanford, Fla.	$1,820	34.8%	$1,585	24.0%	$1,690	35.2%	$2,070	44.3%
Philadelphia-Camden-Wilmington, Pa.-N.J.-Del.-Md.	$1,771	11.0%	$1,440	14.7%	$1,695	9.7%	$1,975	9.7%
Phoenix-Mesa-Scottsdale, Ariz.	$1,855	27.1%	$1,350	28.7%	$1,610	26.8%	$2,170	26.7%
Pittsburgh, Pa.	$1,530	18.6%	$1,273	21.2%	$1,511	22.0%	$1,630	14.4%
Portland-Vancouver-Hillsboro, Ore.-Wash.	$1,733	15.5%	$1,425	13.1%	$1,675	15.2%	$1,972	15.3%
Providence-Warwick, R.I.-Mass.	$2,005	17.9%	$1,700	30.8%	$1,705	10.4%	$2,200	18.9%
Raleigh, N.C.	$1,545	23.6%	$1,415	22.1%	$1,425	26.1%	$1,710	24.4%
Richmond, Va.	$1,427	16.7%	$1,195	21.3%	$1,311	17.1%	$1,549	16.5%
Riverside-San Bernardino-Ontario, Calif.	$2,618	25.2%	$1,520	12.6%	$2,185	25.2%	$2,845	22.0%
Rochester, N.Y.	$1,264	10.0%	$915	1.7%	$1,155	9.5%	$1,395	12.0%
Sacramento--Roseville--Arden-Arcade, Calif.	$2,064	21.6%	$1,939	22.6%	$1,949	21.6%	$2,195	19.4%
San Antonio-New Braunfels, Texas	$1,377	25.2%	$1,212	22.5%	$1,251	24.9%	$1,550	24.0%
San Diego-Carlsbad, Calif.	$3,025	31.5%	$2,389	28.9%	$2,750	29.1%	$3,395	30.7%
San Francisco-Oakland-Hayward, Calif.	$2,975	12.0%	$2,415	18.2%	$2,796	13.8%	$3,495	11.7%
San Jose-Sunnyvale-Santa Clara, Calif.	$3,062	14.3%	$2,466	23.3%	$2,834	15.7%	$3,475	14.0%
Seattle-Tacoma-Bellevue, Wash.	$2,086	19.5%	$1,720	25.5%	$2,070	21.8%	$2,456	17.0%
St. Louis, Mo.-Ill.	$1,295	15.6%	$995	10.7%	$1,235	15.9%	$1,404	14.6%
Tampa-St. Petersburg-Clearwater, Fla.	$2,070	37.5%	$1,925	34.1%	$1,891	40.5%	$2,300	36.7%
Virginia Beach-Norfolk-Newport News, Va.-N.C.	$1,500	16.7%	$1,250	14.7%	$1,410	13.7%	$1,595	16.0%
Washington-Arlington-Alexandria, DC-Va.-Md.-W. Va.	$2,085	12.7%	$1,713	14.1%	$1,985	11.8%	$2,444	12.3%

Methodology
Rental data as of January 2022 for units advertised as for-rent on Realtor.com^®. Rental units include apartment communities as well as private rentals (condos, townhomes, single-family homes). All units were studio, 1-bedroom, or 2-bedroom units. We use communities that reliably report data each month within the top 50 largest metropolitan areas. National rents were calculated by averaging the medians of the 50 largest metropolitan areas.

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. Memphis for sale data was excluded while inventory data is under review. Monthly buying costs assume a 7% down payment, with a mortgage rate of 3.45%, and include taxes, insurance and HOA fees. Memphis for sale data was excluded while inventory data is under review.

Please note: With the release of its January 2022 Rental Report, Realtor.com^® incorporated a new and improved methodology for capturing and reporting rental listing trends and metrics. As a result of these changes, this release is not directly comparable with previous Realtor.com^® data releases and reports. However, future Realtor.com^® data releases, including historical data, will consistently apply the new methodology. See more details here.

About Realtor.com^®
Realtor.com^® makes buying, selling, renting and living in homes easier and more rewarding for everyone. Realtor.com^® pioneered the world of digital real estate more than 25 years ago, and today through its website and mobile apps offers a marketplace where people can learn about their options, trust in the transparency of information provided to them, and get services and resources that are personalized to their needs. Using proprietary data science and machine learning technology, Realtor.com^® pairs buyers and sellers with local agents in their market, helping take the guesswork out of buying and selling a home. For professionals, Realtor.com^® is a trusted provider of 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
rachel.conner@move.com 

¹ See methodology below for a detailed breakdown of monthly starter home buying costs.

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SOURCE Realtor.com

FAQ

What is the trend in rental prices as of January 2022?

Rental prices have surged, with a 19.8% year-over-year increase, reaching a median of $1,789.

Which cities favored buying a starter home over renting in January 2022?

Cities like Birmingham, Cleveland, and Pittsburgh showed significant advantages for buying over renting in January 2022.

How much lower is the cost of buying a starter home compared to renting in major U.S. metros?

In January 2022, buying a starter home was 20.6% lower in cost than renting in 26 of the largest U.S. metros.

What was the median listing price for starter homes in January 2022?

The median listing price for a starter home was $295,360 as of January 2022.

What factors are affecting the decision to rent or buy in 2022?

Rising rental prices, mortgage rates, and personal circumstances are influencing the rent vs. buy decision for many Americans.