Rental prices have fallen for the 15th month in a row – so of course it makes more sense to rent rather than buy, right?
It’s not that simple.
Right now, it’s more affordable to rent than to buy in all 50 major metro areas, according to Realtor.com’s October 2024 Rent Report. The median asking rent in these metros was $1,720, down $23 from last month and $40 from its peak in August 2022.
Meanwhile, with an average home listing price of $425,950, a monthly mortgage payment would set the average home buyer back $2,229 — about 30% more than the average rental price. This assumes a 20% down payment and a 6.93% interest rate. It does not include property taxes or insurance.
So it makes sense to rent, right? Again, it’s not that simple.
Why you can rent
Renting has benefits beyond saving money in the short term.
It doesn’t require all the hard work of maintenance and housekeeping, which can be expensive and time-consuming. Homeowners can expect to spend between 1% and 4% of the price of their home on maintenance each year.
“One of the biggest advantages of renting is the lack of liability when it comes to major systems and appliances within your living space,” says Scott Waters, a real estate professional with Real Broker LLC, in Maclean, VA. “When there is a problem with a major system in a rental home, the landlord is ultimately responsible for taking care of the tenant and the problem.”
Leasing also offers flexibility.
“If you wake up tomorrow and want to move to another state, as a homeowner, you’ll have to list your home, wait for an offer, and go through the settlement process. As a renter, you have the flexibility to move at the end of rent or even sublease your space, says Waters.
On the other hand, renting doesn’t allow you to build the equity you would if you owned your home. Furthermore, your living situation is at the whim of your landlord. And you’re essentially paying off someone else’s mortgage, gaining no long-term value.
Why you should buy
Buying offers you a chance to build capital and long-term wealth.
While interest rates are high compared to where they were a few years ago, that shouldn’t keep you out of the market. There is no way to know, after all, whether they will go up or down in the future.
“Even with current mortgage rates hovering around 6.92% to 7.05%, buying a home can still be a smart choice. Yes, these rates are higher than we’ve seen in recent years, but they’re not that scary when you consider the long-term benefits of home ownership,” says Mike Roberts, co-founder and CEO of City Creek Mortgage. in Draper, UT.
There is also stability with a fixed rate mortgage.
“Tenants are often at the mercy of landlords who can raise the rent every year,” says Roberts. “With a fixed rate mortgage, your payment stays the same for 30 years. That predictability is worth something.â€
And not much beats the security of owning your own home.
However, there are some downsides: You’ll need a pretty big chunk of change for a down payment — the average payment between July and September this year was $30,300 — and you’ll be responsible for any maintenance issues.
So is it worth buying?
Prospective buyers should weigh the short-term savings against the long-term opportunity to build equity, says Realtor.com economist Jiayi Xu.
“For those considering a transition from renting to home ownership, it’s essential to stay informed about market trends and estimate the expected length of stay in their future home,” she adds.
If you decide to buy
“If a buyer can afford the current interest rates and can come up with the capital for a down payment, they’re likely playing in a less competitive field right now — especially because conditions are tough,” he says. Graham Hilla real estate consultant with Find Hokkaido Agents. “Deals that barely make sense now will become more profitable as prices rise and then again when these owners refinance after interest rates come down,” which also seems likely.
Xu recommends using Rent vs. Realtor.com. Shop the Calculator to determine if it makes sense to pursue homeownership now or later.
“This tool helps users understand how long it may take to buy a home to become the most financially viable option based on current market conditions,” she says. “By providing personalized insights, the calculator empowers consumers to evaluate not only the best option for their current situation, but also how the decision could affect their finances in the years to come.â€
If you choose to rent
Generally, but not always, there is a correlation between average listing prices and rental prices. For example, Pittsburgh has the cheapest median listing price among the top 50 metros, at $314,825. That equates to a monthly mortgage of $1,664 before property taxes and insurance are included.
However, Pittsburgh’s average monthly rent is relatively high: $1,462. It’s only the 19th most affordable city to rent in and is $400 more than the least expensive rental market on the list, Oklahoma City, OK, with an average monthly rent of $1,021.
Using the current interest rate of 6.93% and assuming a 20% down payment on a 30-year fixed mortgage, we’ve compared renting to buying in some of the most expensive rental markets.
5 of the most expensive rental markets
San Jose, CA
- Average monthly rent: $3,333
- Average monthly mortgage (excluding taxes and insurance): $7,367
- Buying a home costs much more than renting: 119.8%
Boston, MA
- Average monthly rent: $2,944
- Average monthly mortgage (excluding taxes and insurance): $4,426
- Buying a home costs much more than renting: 50.34%
Los Angeles, CA
- Average monthly rent: $2,848
- Average monthly mortgage (excluding taxes and insurance): $6,078
- Buying a home costs much more than renting: 113.41%
New York, NY
- Average monthly rent: $2,881
- Average monthly mortgage (excluding taxes and insurance): $4,029
- Buying a home costs much more than renting: 39.85%
San Francisco, CA
- Average monthly rent: $2,766
- Average monthly mortgage (excluding taxes and insurance): $5,266
- Buying a home costs much more than renting: 90.38%
5 of the cheapest rental markets
Oklahoma City, OK
- Average monthly rent: $1,021
- Average monthly mortgage (excluding taxes and insurance): $1,664
- Buying a home costs much more than renting: 13.82%
Memphis, TN
- Average monthly rent: $1,204
- Average monthly mortgage (excluding taxes and insurance): $1,770
- Buying a home costs much more than renting: 47.01%
Columbus, OH
- Average monthly rent: $1,210
- Average monthly mortgage (excluding taxes and insurance): $1,950
- Buying a home costs much more than renting: 61.16%
Cleveland, OH
- Average monthly rent: $1,222
- Average monthly mortgage (excluding taxes and insurance): $1,321
- Buying a home costs much more than renting: 8.1%
Louisville, KY
- Average monthly rent: $1,249
- Average monthly mortgage (excluding taxes and insurance): $1,321
- Buying a home costs much more than renting: 8.1%
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