Realtor.com® July Rental Report: Buying a Starter Home is More Affordable than Renting in Nearly Half of the Biggest U.S. Metros

Rhea-AI Summary

According to Realtor.com®'s Monthly Rental Report, buying a starter home is now cheaper than renting in 24 of the 50 largest U.S. metros. Notably, Birmingham, AL, leads with a 33.1% cost difference. Rents surged by 9.8% year-over-year, with median monthly rents reaching $1,802 for two-bedrooms. First-time homebuying appears advantageous, with monthly starter home payments averaging 15.5% lower than rents in nearly half the major markets, despite rising home prices and limited inventory. Key metros for affordable buying include St. Louis, Pittsburgh, and Orlando.

Positive

• Buying starter homes is cheaper than renting in 24 of the top 50 largest U.S. metros.
• Average monthly starter home payments are 15.5% lower than renting across major markets.
• Possible affordability in markets like Birmingham, St. Louis, and Pittsburgh, where costs are significantly lower.

Negative

• Overall rents increased by 9.8% year-over-year, putting financial pressure on renters.
• Limited inventory of entry-level homes may hinder first-time buyers despite lower costs.

SANTA CLARA, Calif., Aug. 26, 2021 /PRNewswire/ -- As rents continue to hit new highs and mortgage rates remain low, buying a starter home now costs less per month than renting a similar-sized unit in 24 of the 50 largest U.S. metros, according to the Realtor.com^® Monthly Rental Report released today. The top markets where it's more affordable to buy a starter home versus rent one include: Birmingham, Ala. (33.1% lower), St. Louis, Mo. (29.4% lower), Pittsburgh (27.7% lower), Orlando (25.9% lower) and Cleveland (25.7% lower).

Nationally, rents continued rising at an unusually fast pace in July, up 9.8% over last year and 12.2% since 2019. All unit sizes tracked by Realtor.com^® posted rent gains and hit new highs: Two-bedrooms at $1,802 (+10.9%), one-bedrooms at $1,495 (+9.5%) and studios at $1,315 (+5.6%).

"Rents hit new highs in 40 of the 50 largest U.S. metros this July and grew at an almost double-digit pace – the fastest yearly rate we've seen in the last 18 months," said Realtor.com^® Chief Economist Danielle Hale. "Sky-high rents and historically low interest rates have made the  monthly cost to buy a starter home lower than renting one in nearly half the markets across the U.S. While this is good news for first-time buyers in these metros, there are plenty of other factors to consider when deciding whether to become a homeowner, including making sure it's the right time for you and your family. But if the monthly costs have been holding you back, data suggests it's worth exploring in many markets, and although it's still hard to find entry-level homes, we are seeing more smaller homes coming on the market."

Hale added, many of July's highest rent gains were seen in secondary markets where rental demand has exploded during COVID, driven in part by remote work enabling employees to escape crowded, expensive big cities – at least temporarily. With the future of remote work uncertain for many Americans, first-time homebuyers saw less of a frenzy than renters in a number of July's highest-priced rental markets. This has helped keep monthly starter home costs an average 15.5% ($216) lower than rents in nearly half of the 50 largest U.S. metros. (See methodology below.)

First-time homebuying is relatively more affordable in hot rental markets
In the top 10 metros that favored first-time homebuying over renting in July, monthly starter home payments were an average 24.3% lower than rents, driven in part by lower median listing prices ($192,000) than the national average ($297,000). The types of starter homes for sale also play a key role in monthly payments, with active inventory in these buyer-friendly metros including nearly two times the share of single-family starter homes (56.1%) than in condo-heavy markets that favor renting.

In July, the top 10 markets that favored buying over renting were: Birmingham, Ala. (33.1% lower), St. Louis, Mo. (29.4% lower), Pittsburgh (27.7% lower), Orlando (25.9% lower), Cleveland (25.7% lower), Tampa (22.9% lower), Baltimore (20.5% lower), Indianapolis (20.4% lower), Virginia Beach (19.2% lower) and Riverside, Calif. (18.5% lower).

Many of these metros also posted sizeable rent gains over last year in July, led by Riverside (+29.7%), where the median rental price of $2,230 was 18.5% ($413) higher than starter home payments, at $1,817 per month. Even with the surge in prices, Riverside rents were relatively lower than in nearby Los Angeles ($2,742), making the metro an attractive option to big city renters looking to save during COVID. Compared to Los Angeles, first-time homebuyers in Riverside saw 51.5% lower asking prices and nearly three times the share of single-family starter homes, at 75.1% of entry-level inventory in July.

Renting beats out buying in big tech cities with rents yet to recover from COVID 
Typically some of the nation's most expensive housing markets, big tech hubs largely favored renting over buying a starter home in July, partly attributed to higher condo HOA fees. Among 0-2 bedroom homes in these top 10 cities, over seven-in-ten (71%) were condos, on average, compared to 58% nationwide, while median HOA fees of $334 among homes that had this fee were 27% higher than the U.S. median ($263).

Seven of the top 10 markets where monthly starter home costs were higher than rents are tech-heavy areas, including: Austin, at 79.2% higher; San Jose, at 47.5% higher; San Francisco, at 44.4% higher; Seattle, at 44.2% higher; Boston, at 40.9% higher; Los Angeles at 39.4% higher; and New York, at 32.0% higher.

While rental prices have surpassed pre-COVID levels in the majority of U.S. markets, rents in many of the biggest tech cities have yet to catch up to historical peaks. Among the 50 largest U.S. markets, the only four where rents declined from last year in July were all big tech hubs: New York (-6.1%), Boston (-3.7%), San Francisco (-2.9%) and Chicago (-1.4%).

Leading the list of metros that favor renting by a wide margin, at $1,228 higher monthly starter home costs than rents, Austin is currently one of the nation's most competitive housing markets. While costs like median HOA fees are relatively lower in Austin compared to other big tech cities, at $104 versus $1,222 in New York, first-time homebuyers are competing for limited affordable options, with 0-2 bedroom home inventory down 59% year-over-year and prices up 17.5% to a median $431,000 in July.

"Emerging tech hubs like Austin have seen a surge in housing demand in recent years as more Silicon Valley companies have opened or expanded offices in these areas. Relocating employees, including many millennials, can see their housing dollars go much further, with rental costs roughly half as high as in San Francisco and San Jose and starter home costs more than a third lower. With growth expected to continue in Austin, there's a premium on real estate, but California transplants may find that relative affordability creates first-time homebuying opportunities," Hale said.

Realtor.com®July 2021 Rental Data - Top 10 Markets that Favor Buying Over Renting
Rank	Metro	% Cost Difference (Buy-Rent)	$ Cost Difference (Buy-Rent)	Median Rent	Monthly Buy Cost	Rent YoY	Buy Cost YoY
1	Birmingham-Hoover, Ala.	-33.1%	-$361	$1,089	$728	12.3%	28.2%
2	St. Louis, Mo.-Ill.	-29.4%	-$340	$1,155	$815	7.4%	13.7%
3	Pittsburgh, Pa.	-27.7%	-$381	$1,376	$995	8.3%	18.9%
4	Orlando-Kissimmee-Sanford, Fla.	-25.9%	-$403	$1,557	$1,154	16.2%	4.5%
5	Cleveland-Elyria, Ohio	-25.7%	-$280	$1,089	$809	6.8%	2.4%
6	Tampa-St. Petersburg-Clearwater, Fla.	-22.9%	-$389	$1,698	$1,309	27.2%	15.1%
7	Baltimore-Columbia-Towson, Md.	-20.5%	-$337	$1,647	$1,310	6.8%	7.8%
8	Indianapolis-Carmel-Anderson, Ind.	-20.4%	-$235	$1,150	$915	13.5%	4.9%
9	Virginia Beach-Norfolk-Newport News, Va.-N.C.	-19.2%	-$256	$1,330	$1,074	11.9%	3.1%
10	Riverside-San Bernardino-Ontario, Calif.	-18.5%	-$413	$2,230	$1,817	29.7%	17.7%

 

Realtor.com®July 2021 Rental Data - Top 10 Markets that Favor Renting Over Buying
Rank	Metro	% Cost Difference (Buy-Rent)	$ Cost Difference (Buy-Rent)	Median Rent	Monthly Buy Cost	Rent YoY	Buy Cost YoY
1	Austin-Round Rock, Texas	79.2%	$1,228	$1,550	$2,778	14.8%	17.2%
2	San Jose-Sunnyvale-Santa Clara, Calif.	47.5%	$1,396	$2,936	$4,332	1.4%	4.8%
3	San Francisco-Oakland-Hayward, Calif.	44.4%	$1,272	$2,865	$4,137	-2.9%	-5.7%
4	Seattle-Tacoma-Bellevue, Wash.	44.2%	$872	$1,975	$2,847	5.6%	3.1%
5	Boston-Cambridge-Newton, Mass.-N.H.	40.9%	$1,001	$2,450	$3,451	-3.7%	6.1%
6	Los Angeles-Long Beach-Anaheim, Calif.	39.4%	$1,081	$2,742	$3,823	6.7%	9.5%
7	New York-Newark-Jersey City, N.Y.-N.J.-Pa.	32.0%	$773	$2,418	$3,191	-6.1%	5.6%
8	Dallas-Fort Worth-Arlington, Texas	26.9%	$382	$1,420	$1,802	13.6%	-0.6%
9	Rochester, N.Y.	26.5%	$321	$1,210	$1,531	9.5%	-8.0%
10	Portland-Vancouver-Hillsboro, Ore.-Wash.	26.4%	$443	$1,675	$2,118	11.7%	14.1%

 

Realtor.com®July 2021 Rental Data - 50 Largest Metropolitan Areas
Metro	Median Rent	Rent Y/Y	Studio Median Rent	Studio Rent Y/Y	1br Median Rent	1br Rent Y/Y	2br Median Rent	2br Rent Y/Y	% Cost Difference (Buy-Rent)
Atlanta-Sandy Springs-Roswell, Ga.	$1,649	18.5%	$1,525	13.4%	$1,555	19.1%	$1,812	20.8%	-5.8%
Austin-Round Rock, Texas	$1,550	14.8%	$1,233	9.5%	$1,430	16.7%	$1,755	17.4%	79.2%
Baltimore-Columbia-Towson, Md.	$1,647	6.8%	$1,450	16.0%	$1,569	7.1%	$1,750	5.8%	-20.5%
Birmingham-Hoover, Ala.	$1,089	12.3%	$1,105	18.2%	$1,040	12.4%	$1,121	12.7%	-33.1%
Boston-Cambridge-Newton, Mass.-N.H.	$2,450	-3.7%	$2,050	-7.0%	$2,325	-3.1%	$2,675	-8.3%	40.9%
Buffalo-Cheektowaga-Niagara Falls, N.Y.	$1,185	7.4%	$860	8.2%	$1,070	4.4%	$1,350	8.0%	17.2%
Charlotte-Concord-Gastonia, N.C.-S.C.	$1,476	14.0%	$1,340	13.8%	$1,368	13.5%	$1,624	14.8%	-14.7%
Chicago-Naperville-Elgin, Ill.-Ind.-Wis.	$1,675	-1.4%	$1,200	-16.7%	$1,626	-2.0%	$1,895	0.0%	-4.7%
Cincinnati, Ohio-Ky.-Ind.	$1,188	13.1%	$1,030	1.3%	$1,135	10.7%	$1,269	15.4%	-1.4%
Cleveland-Elyria, Ohio	$1,089	6.8%	$795	2.7%	$1,029	6.1%	$1,190	10.2%	-25.7%
Columbus, Ohio	$1,165	10.7%	$995	10.7%	$1,105	11.1%	$1,250	11.0%	1.1%
Dallas-Fort Worth-Arlington, Texas	$1,420	13.6%	$1,226	14.4%	$1,299	14.4%	$1,682	16.8%	26.9%
Denver-Aurora-Lakewood, Colo.	$1,866	12.9%	$1,548	9.0%	$1,748	13.6%	$2,175	15.1%	14.8%
Detroit-Warren-Dearborn, Mich.	$1,195	8.6%	$995	5.3%	$1,036	10.2%	$1,340	7.6%	-14.1%
Hartford-West Hartford-East Hartford, Conn.	$1,545	7.7%	$1,149	-2.5%	$1,450	6.6%	$1,750	10.9%	-16.4%
Houston-The Woodlands-Sugar Land, Texas	$1,295	7.9%	$1,260	10.3%	$1,185	8.2%	$1,454	7.8%	25.2%
Indianapolis-Carmel-Anderson, IN	$1,150	13.5%	$964	4.2%	$1,055	12.2%	$1,280	18.0%	-20.4%
Jacksonville, Fla.	$1,361	17.3%	$1,000	28.4%	$1,260	20.6%	$1,475	19.0%	-9.7%
Kansas City, Mo.-Kan.	$1,150	7.6%	$900	4.0%	$1,034	5.0%	$1,346	8.1%	-17.0%
Las Vegas-Henderson-Paradise, Nev.	$1,454	19.7%	$900	9.1%	$1,340	22.4%	$1,595	21.0%	-9.7%
Los Angeles-Long Beach-Anaheim, Calif.	$2,742	6.7%	$2,049	2.7%	$2,480	6.0%	$3,288	8.8%	39.4%
Louisville/Jefferson County, Ky.-Ind.	$1,035	8.9%	$900	3.4%	$985	6.8%	$1,135	13.5%	-18.2%
Memphis, Tenn.-Miss.-Ark.	$1,188	24.4%	$1,050	13.5%	$1,164	24.5%	$1,235	24.7%	---1
Miami-Fort Lauderdale-West Palm Beach, Fla.	$2,300	20.7%	$1,845	18.2%	$2,030	17.3%	$2,622	17.1%	-3.1%
Milwaukee-Waukesha-West Allis, Wis.	$1,401	3.8%	$1,075	-1.8%	$1,300	2.0%	$1,625	6.6%	5.9%
Minneapolis-St. Paul-Bloomington, Minn.-Wis.	$1,500	2.7%	$1,215	0.9%	$1,439	2.5%	$1,824	7.4%	-2.9%
Nashville-Davidson-Murfreesboro-Franklin, Tenn.	$1,479	11.6%	$1,525	7.3%	$1,399	12.2%	$1,529	11.2%	11.1%
New Orleans-Metairie, La.	$1,340	3.1%	$975	14.7%	$1,275	0.8%	$1,500	0.0%	15.1%
New York-Newark-Jersey City, N.Y.-N.J.-Pa.	$2,418	-6.1%	$2,145	-12.3%	$2,235	-6.9%	$2,720	-2.5%	32.0%
Oklahoma City, Okla.	$859	6.8%	$685	-14.4%	$789	10.3%	$930	6.4%	7.9%
Orlando-Kissimmee-Sanford, Fla.	$1,557	16.2%	$1,390	15.8%	$1,450	17.4%	$1,757	22.7%	-25.9%
Philadelphia-Camden-Wilmington, Pa.-N.J.-Del-Md.	$1,635	3.5%	$1,300	2.0%	$1,575	3.3%	$1,820	4.0%	-9.2%
Phoenix-Mesa-Scottsdale, Ariz.	$1,643	23.5%	$1,210	28.0%	$1,475	25.7%	$1,840	22.7%	5.8%
Pittsburgh, Pa.	$1,376	8.3%	$1,220	10.9%	$1,310	8.3%	$1,503	11.3%	-27.7%
Portland-Vancouver-Hillsboro, Ore.-Wash.	$1,675	11.7%	$1,390	5.7%	$1,623	10.8%	$1,899	16.9%	26.4%
Providence-Warwick, R.I.-Mass.	$1,800	8.8%	$1,350	-16.0%	$1,595	7.8%	$2,000	11.1%	4.0%
Raleigh, N.C.	$1,442	16.4%	$1,309	11.6%	$1,331	17.5%	$1,610	20.0%	11.0%
Richmond, Va.	$1,272	13.6%	$1,146	19.0%	$1,174	17.4%	$1,401	12.5%	-2.8%
Riverside-San Bernardino-Ontario, Calif.	$2,230	29.7%	$1,368	9.9%	$1,841	22.7%	$2,605	39.8%	-18.5%
Rochester, N.Y.	$1,210	9.5%	$882	8.9%	$1,103	10.4%	$1,350	8.9%	26.5%
Sacramento-Roseville-Arden-Arcade, Calif.	$1,890	20.9%	$1,639	12.2%	$1,750	20.1%	$2,000	20.8%	13.2%
San Antonio-New Braunfels, Texas	$1,150	9.0%	$950	4.6%	$1,064	11.4%	$1,324	11.7%	20.3%
San Diego-Carlsbad, Calif.	$2,610	21.7%	$995	7.1%	$2,422	24.5%	$2,950	20.4%	18.6%
San Francisco-Oakland-Hayward, Calif.	$2,865	-2.9%	$2,080	18.5%	$2,650	-5.2%	$3,336	-4.7%	44.4%
San Jose-Sunnyvale-Santa Clara, Calif.	$2,936	1.4%	$2,305	-8.3%	$2,750	3.3%	$3,333	1.2%	47.5%
Seattle-Tacoma-Bellevue, Wash.	$1,975	5.6%	$2,337	7.4%	$1,990	5.0%	$2,212	4.3%	44.2%
St. Louis, Mo.-Ill.	$1,155	7.4%	$1,607	2.0%	$1,130	10.2%	$1,229	7.7%	-29.4%
Tampa-St. Petersburg-Clearwater, Fla.	$1,698	27.2%	$1,520	20.7%	$1,560	30.5%	$1,911	31.8%	-22.9%
Virginia Beach-Norfolk-Newport News, Va.-N.C.	$1,330	11.9%	$1,129	3.6%	$1,300	12.6%	$1,439	16.4%	-19.2%
Washington-Arlington-Alexandria, D.C.-Va.-Md.-W.V.	$2,020	3.3%	$1,634	-2.9%	$1,929	2.1%	$2,387	7.1%	4.3%

Methodology
Rental data as of July 2021. 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. 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 5% down payment, with a mortgage rate of 2.87%, and include taxes, insurance and HOA fees. Typical market-level monthly HOA fees were included in the overall monthly cost of buying, and the median was not conditional on the presence of an HOA fee. This means that the typical HOA fee included reflects both the fees themselves as well as the prevalence of HOA fees in the cost of local starter homes. All else equal, areas where more homes have HOA fees will reflect a higher HOA fee inclusion.

About Realtor.com^®
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¹ Memphis for sale data was excluded while inventory data is under review

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SOURCE Realtor.com

FAQ

Which U.S. metros are more affordable for buying starter homes than renting?

Birmingham, AL (33.1% lower), St. Louis, MO (29.4% lower), and Pittsburgh, PA (27.7% lower) are among the top metros where buying is cheaper.

How much did rents increase nationally in July 2021?

National rents increased by 9.8% year-over-year as of July 2021.

What is the average cost difference between buying and renting starter homes?

Monthly starter home payments are an average of 15.5% lower than rents in nearly half of the largest U.S. metros.

Which market has the highest cost difference favoring renting over buying?

Austin, TX shows a 79.2% higher cost for monthly starter home payments compared to renting.

What is the significance of the rising rents in major U.S. metros?

Rising rents, increasing by 9.8% year-over-year, indicate a persistent challenge for renters, affecting affordability.