SANTA CLARA, Calif. – (By Dale King, Realty News Report) – With rents continuing to decline through July, renting a starter home in any of the 50 largest U.S. metros is seen as a better financial plan than purchasing a residence – at least for the time being, says a rental report just released by real estate marketplace Realtor.com.
The document says folks looking to score the best deal should head for the Number 1 metro on the list, Austin, or one of its environs, Round Rock and Georgetown, where the monthly cost of buying a starter home is about $3,558 – 144.4 percent more than the monthly rent payment of $1,468 for a leased property – a substantial per-month saving of $2,120.
The capitol city isn’t the only Lone Star bargain in the roster of top metros offering the largest rent vs. buy savings. The Dallas-Fort Worth-Arlington metro notched a median monthly rent of $1,481 while purchasing a starter home came with a price tag of $2,788 a month – a difference of $1,307 (88.3 percent per month).
A couple of other Texas metropolitan areas didn’t make the top 10 but did offer some enticing figures for those looking to lease a starter home. In the Houston-The Woodlands-Sugar Land MSA, median monthly rent was listed at $1,402 while the cost of a starter home broke down to $2,442 a month. That’s a difference of $1,040 a month, or a 74.2 percent difference, says the Realtor.com analysis.
To rent a starter home in the San Antonio-New Braunfels area, the report says a leaseholder would have to shell out $1,232 a month for a median-priced unit. Buying a starter home would cost $2,035 a month – a difference of $803 a month or a 65.2 percent gap in the outlay of cash.
Other top markets around the U.S. that urged renting over buying were Seattle, Los Angeles, San Francisco, New York and Columbus, Ohio. Affordable rental prices in these regions propelled them into the report’s top ten rent-favoring metros.
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“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 elevated mortgage rates, high home prices and falling rents contributed to the more than $1,000 savings in renting over buying,” said Ralph McLaughlin, senior economist at Realtor.com.
But the tide may be turning, he noted. “We are starting to see the advantage of renting over buying decrease across several metros, especially as more affordable inventory hits the market,” the economist noted. “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.” .
Compared to last year, the current advantage of renting has shrunk by 2 percentage points, the report says, “propelled by a greater influx of smaller and more affordable homes for sale leading to a slight decline in listing prices for starter homes.”
In July 2023, the average monthly cost of buying a starter home in the top 50 metros was 63.3 percent higher than renting, the report says. This July, the cost of buying a starter home is 61.3 percent over a purchase transaction — still higher than renting, but the rift is closing – albeit slowly.
Although the overall advantage of renting narrowed by 2 percentage points or $42 across the top 50 metros compared to a year ago, it is 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,” said McLaughlin, “to see the rent advantage diminish most in these metros as homes in these markets experienced large listing price declines on a yearly basis.”
Aug.20, 2024 Realty News Report Copyright 2024
Photo Credit: Ralph Bivins, Realty News Report Copyright 2024
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File: Renting is a Better Than Buying