Realtor.com® June Rental Report: Renting is More Affordable than Buying a Starter Home in Three-Quarters of the Largest Metros
Even as the U.S. median rental price hit a new high of $1,876 in June, climbing mortgage rates drove monthly starter homeownership costs 29.9% ($561) higher than rents
SANTA CLARA, Calif., July 21, 2022 /PRNewswire/ -- New data illustrates how higher mortgage rates are increasingly tipping the housing affordability scale in favor of renting over first-time buying. Nationally, the gap between monthly starter homeownership costs1 and rents widened by 25.5 percentage points (+$483) from January to June, according to the Realtor.com® Monthly Rental Report released today. Additionally, more than three-quarters of the 50 largest U.S. metros favored renting in June, compared to just under half of these markets in January.
"With rents and for-sale home prices both hitting record-highs in June, the rising cost of financing a home purchase stands out as the clear driver of rental affordability relative to typical starter homeownership costs. In fact, our analysis shows that if not for higher mortgage rates, the rent versus first-time buying gap would have shrunk in the first half of this year, as rents grew more quickly than starter home prices," said Realtor.com® Chief Economist Danielle Hale. "While more markets offered relative rental affordability in June than in January, rents are still rising across the country. Plus, many of the areas that favored renting are among the biggest tech cities, where real estate tends to come at a premium. As housing affordability remains a challenge for many Americans, it's key to stay on top of how higher costs impact your budget, whether renting or first-time buying."
June 2022 Rental Metrics – National
Unit Size | Median Rent | Change over | Change over |
Overall | $1,876 | 14.1 % | 23.9 % |
Studio | $1,544 | 15.1 % | 19.3 % |
1-bed | $1,738 | 13.8 % | 22.9 % |
2-bed | $2,104 | 13.6 % | 25.6 % |
The U.S. median rental price hit a new high for the 16th consecutive month in June, but still lagged behind typical starter homeownership costs, and by a greater amount than at the start of the year. This growth is largely attributed to the skyrocketing cost of financing a home purchase, with mortgage rates jumping more than two percentage points from January to June. Although for-sale home prices also hit multiple record-highs in the first half of the year, Realtor.com®'s June analysis found that mortgage rate hikes were the biggest driver of the widening affordability gap between renting and first-time buying.
- In June, the U.S. median rental price hit a new high of $1,876, rising 14.1% year-over-year in the fifth consecutive month of moderation from January's peak (+17.3%). However, overall rents remained 27.6% higher than in 2020 and all unit sizes posted double-digit annual gains: Studios, up 15.1%; one-bedrooms, up 13.8%; and two-bedrooms, up 13.6%.
- Nationally, monthly starter homeownership costs were an average of 29.9% ($561) higher than rents in June, up from 4.4% ($78) in January. In 2021, the monthly cost to buy was $1,815, just $171 higher than rents nationwide.
- Higher mortgage rates were the biggest driver of the widening year-over-year gap between first-time buying and renting, adding $416 to typical monthly starter home costs in June. Comparatively, national starter home listing price growth (+10.4% year-over-year to a median of $332,619) has only added $162 to first-time buying costs since June 2021, while rent increases shrunk the gap by $232.
In June, a significantly greater share of the 50 largest U.S. metros favored renting over buying than at the start of the year. Among key factors driving this shift were trends seen nationwide, such as higher mortgage rates and cooling rent growth. June data also points to a correlation with economic indicators like inflation and unemployment, which were relatively lower in many of the metros with smaller gaps between monthly rents and first-time buying costs. Additionally, the top rent-favoring markets were dominated by the country's biggest tech hubs, while the metros that favored starter homeownership were concentrated in the midwest and south.
- Of the 50 largest U.S. metros, 38 offered lower rents than monthly starter homeownership costs in June, compared to 24 markets in January.
- The country's biggest tech cities accounted for eight of June's top 10 metros that favored renting over buying, led by Austin, Texas where the monthly starter homeownership cost was 97.8% ($1,822) higher than the median rental price. In all of the top 10, renting was at least 52% more affordable than first-time buying (see table below).
- Eleven metros favored first-time buying over renting in June (see table below), including just one metro that flipped from favoring renting in January: Cincinnati, with monthly starter home costs that were 0.9 percentage points lower (-$14) than rents in June.
"Whether you're looking for a rental or trying to buy your first home, our analysis highlights the importance of prioritization when deciding where to live," said Joel Berner, Senior Economic Research Analyst for Realtor.com®. "Take the example of areas with smaller gaps between rents and monthly starter homeownership costs, which may still offer relatively affordable starter homeownership costs. Many of these metros are also attracting home shoppers from out-of-state, in turn driving up the overall cost of living. For first-time buyers prioritizing lower home prices, you may still find options in these areas, but make sure to account for higher costs of other expenses in your budget."
June 2022 Rental Metrics – Top Metros by Affordability of Renting vs. Starter Homeownership
Top 10 Metros Favoring Renting | Top 10 Metros Favoring Starter Homeownership | |||
Metro Area | Monthly Cost | Metro Area | Monthly Cost Difference, Buy-Rent | |
Austin, Texas | 97.8 %($1,822) | Pittsburgh, Penn. | -33.0% (-$522) | |
San Francisco, Calif. | 79.9 %($2,535) | Birmingham, Ala. | -29.5% (-$377) | |
Seattle, Wash. | 78.3 %($1,801) | St. Louis, Mo. | -20.7% (-$284) | |
New York, N.Y. | 70.0 %($2,092) | Cleveland, Ohio | -13.8% (-$198) | |
San Jose, Calif. | 65.4 %($2,175) | Baltimore, Md. | -9.0% (-$164) | |
Portland, Ore. | 61.6 %($1,128) | Louisville, Ky. | -5.0% (-$63) | |
Los Angeles, Calif. | 60.5 %($1,846) | Virginia Beach, Va. | -3.5% (-$55) | |
Boston, Mass. | 57.3 %($1,698) | Indianapolis, Ind. | -2.8% (-$36) | |
Houston, Texas | 53.3 %($773) | Cincinnati, Ohio | -0.9% (-$14) | |
Phoenix, Ariz. | 52.2 %($929) | Kansas City, Mo. | -0.9% (-$12) | |
June 2022 Rental Metrics – 50 Largest U.S. Metro Areas
Metro Area | Overall Median Rent | Overall Rent YoY | Studio Median Rent | Studio Rent YoY | 1-br Median Rent | 1-br Rent YoY | 2-br Median Rent | 2-br Rent YoY | % Difference (Buy-Rent) | $ Difference (Buy-Rent) |
$1,858 | 10.8 % | $1,718 | 14.6 % | $1,731 | 11.4 % | $2,065 | 9.4 % | 13.1 % | $243 | |
$1,864 | 19.6 % | $1,534 | 22.8 % | $1,720 | 23.5 % | $2,050 | 17.0 % | 97.8 % | $1,822 | |
$1,820 | 9.6 % | $1,451 | 2.6 % | $1,716 | 9.2 % | $1,940 | 10.2 % | -9.0 % | -$164 | |
$1,278 | 9.8 % | $982 | -3.8 % | $1,186 | 8.5 % | $1,343 | 11.5 % | -29.5 % | -$377 | |
$2,966 | 23.6 % | $2,499 | 24.3 % | $2,757 | 19.9 % | $3,305 | 25.6 % | 57.3 % | $1,698 | |
$1,345 | 10.0 % | $1,125 | 2.7 % | $1,195 | 8.7 % | $1,495 | 8.9 % | 25.1 % | $337 | |
$1,752 | 18.4 % | $1,619 | 20.9 % | $1,659 | 19.4 % | $1,880 | 12.1 % | 1.3 % | $23 | |
$2,000 | 14.3 % | $1,700 | 25.9 % | $1,960 | 15.3 % | $2,200 | 12.5 % | 21.4 % | $428 | |
$1,499 | 9.1 % | $1,200 | 10.6 % | $1,438 | 9.3 % | $1,626 | 5.8 % | -0.9 % | -$14 | |
$1,432 | 12.1 % | $948 | 6.8 % | $1,317 | 8.6 % | $1,593 | 16.5 % | -13.8 % | -$198 | |
$1,310 | 11.2 % | $1,089 | 10.6 % | $1,235 | 11.5 % | $1,412 | 10.8 % | 37.3 % | $489 | |
$1,702 | 17.7 % | $1,449 | 18.0 % | $1,567 | 19.1 % | $1,988 | 16.0 % | 48.3 % | $822 | |
$2,032 | 10.2 % | $1,666 | 9.1 % | $1,900 | 10.8 % | $2,394 | 10.7 % | 50.4 % | $1,025 | |
$1,445 | 9.6 % | $1,107 | 11.3 % | $1,195 | 6.0 % | $1,600 | 9.3 % | 2.0 % | $29 | |
$1,755 | 11.3 % | $1,469 | 26.9 % | $1,606 | 8.2 % | $2,063 | 11.8 % | 15.0 % | $262 | |
$1,450 | 10.2 % | $1,356 | 6.7 % | $1,333 | 10.5 % | $1,627 | 8.5 % | 53.3 % | $773 | |
$1,303 | 10.9 % | $1,059 | 9.2 % | $1,207 | 14.0 % | $1,445 | 10.5 % | -2.8 % | -$36 | |
$1,647 | 17.8 % | $1,192 | 25.5 % | $1,537 | 16.7 % | $1,809 | 17.3 % | 22.3 % | $368 | |
$1,326 | 10.2 % | $1,024 | 3.8 % | $1,252 | 14.3 % | $1,533 | 11.2 % | -0.9 % | -$12 | |
$1,650 | 14.7 % | $1,295 | 18.3 % | $1,514 | 14.0 % | $1,760 | 11.8 % | 38.7 % | $639 | |
$3,051 | 14.1 % | $2,329 | 17.2 % | $2,798 | 16.2 % | $3,505 | 14.1 % | 60.5 % | $1,846 | |
$1,253 | 13.9 % | $1,046 | 15.6 % | $1,148 | 10.1 % | $1,420 | 12.1 % | -5.0 % | -$63 | |
$1,408 | 12.2 % | $1,149 | 10.0 % | $1,368 | 12.4 % | $1,552 | 12.5 % | N/A* | ||
$2,850 | 37.4 % | $2,499 | 38.8 % | $2,494 | 31.7 % | $3,245 | 37.5 % | 16.6 % | $473 | |
$1,580 | 10.9 % | $1,230 | 7.0 % | $1,470 | 8.9 % | $1,798 | 9.1 % | 44.2 % | $699 | |
$1,597 | 3.3 % | $1,250 | 3.7 % | $1,502 | 2.8 % | $1,943 | 2.1 % | 40.9 % | $653 | |
$1,780 | 18.4 % | $1,665 | 6.0 % | $1,650 | 17.1 % | $1,909 | 21.1 % | 30.6 % | $545 | |
$1,765 | 6.6 % | $1,400 | 25.7 % | $1,640 | 9.3 % | $2,063 | 8.6 % | 31.5 % | $555 | |
$2,989 | 21.1 % | $2,700 | 34.8 % | $2,693 | 18.1 % | $3,365 | 18.1 % | 70.0 % | $2,092 | |
$1,033 | 14.1 % | $958 | 35.1 % | $933 | 9.9 % | $1,140 | 15.7 % | 15.8 % | $163 | |
$1,979 | 23.9 % | $1,721 | 22.4 % | $1,833 | 23.4 % | $2,246 | 25.9 % | -0.6 % | -$12 | |
$1,811 | 6.8 % | $1,535 | 7.9 % | $1,748 | 5.9 % | $1,995 | 5.0 % | 15.0 % | $271 | |
$1,781 | 11.1 % | $1,441 | 12.9 % | $1,629 | 10.9 % | $1,950 | 8.6 % | 52.2 % | $929 | |
$1,583 | 9.4 % | $1,294 | 7.8 % | $1,570 | 9.4 % | $1,742 | 8.0 % | -33.0 % | -$522 | |
$1,833 | 10.5 % | $1,456 | 3.1 % | $1,789 | 10.3 % | $2,197 | 9.4 % | 61.6 % | $1,128 | |
$2,200 | 23.8 % | $1,759 | 11.0 % | $1,908 | 22.5 % | $2,500 | 26.7 % | 18.9 % | $417 | |
$1,675 | 16.7 % | $1,531 | 20.4 % | $1,562 | 19.1 % | $1,894 | 16.8 % | 29.1 % | $487 | |
$1,465 | 13.4 % | $1,188 | 16.1 % | $1,334 | 13.8 % | $1,586 | 14.1 % | 25.9 % | $380 | |
$2,622 | 7.2 % | $1,840 | 24.3 % | $2,203 | 6.4 % | $2,850 | 6.7 % | 6.3 % | $165 | |
$1,362 | 8.4 % | $1,000 | 12.0 % | $1,318 | 14.6 % | $1,498 | 11.2 % | 19.5 % | $265 | |
$2,102 | 7.3 % | $1,861 | 3.7 % | $1,993 | 5.6 % | $2,285 | 7.1 % | 46.7 % | $981 | |
$1,413 | 16.7 % | $1,273 | 14.8 % | $1,296 | 18.3 % | $1,621 | 16.5 % | 46.6 % | $658 | |
$3,182 | 19.1 % | $2,485 | 17.9 % | $2,943 | 23.2 % | $3,558 | 19.4 % | 39.0 % | $1,241 | |
$3,171 | 12.6 % | $2,541 | 15.0 % | $2,914 | 11.7 % | $3,626 | 9.7 % | 79.9 % | $2,535 | |
$3,324 | 18.5 % | $2,529 | 12.7 % | $3,104 | 18.9 % | $3,735 | 18.5 % | 65.4 % | $2,175 | |
$2,299 | 15.7 % | $1,892 | 18.1 % | $2,270 | 13.3 % | $2,731 | 14.6 % | 78.3 % | $1,801 | |
$1,371 | 7.5 % | $998 | 7.0 % | $1,292 | 7.7 % | $1,500 | 7.0 % | -20.7 % | -$284 | |
$2,109 | 16.5 % | $2,020 | 20.2 % | $1,899 | 16.4 % | $2,318 | 17.0 % | 2.6 % | $55 | |
$1,581 | 11.7 % | $1,372 | 12.5 % | $1,493 | 11.1 % | $1,721 | 9.2 % | -3.5 % | -$55 | |
$2,198 | 11.5 % | $1,757 | 9.9 % | $2,082 | 11.6 % | $2,610 | 10.1 % | 38.7 % | $850 | |
*Memphis excluded from the Rent vs. Buy analysis due to data irregularities.
Rental data as of June 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. National rents were calculated by averaging the medians of the 50 largest U.S. metropolitan areas, defined by the Core-Based Statistical Area (CBSA). Realtor.com® began publishing regular monthly rental trends reports in October 2020 with data history going back to March 2019.
Note: With the release of its May 2022 Rental Report, Realtor.com® incorporated a new and improved methodology (see details here). As a result of these changes, the rental data released since May 2022 will not be directly comparable with prior publications and downloaded files. However, future releases, including historical data, will consistently apply the new methodology.
Rent vs. Buy Analysis: Subtracts median rents from monthly starter homeownership costs, defined as: listing prices of for-sale homes with 0- to 2-bedrooms; a 7% down payment; June's average Freddie Mac 30-year fixed mortgage rate; HOA fees, taxes, and homeowner's insurance.
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®.
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1 See methodology below for a detailed breakdown of monthly starter home buying costs.
SOURCE Realtor.com
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