The average cost difference between buying a home and renting one is shrinking, and the number of places in the US where it’s cheaper to rent than buy is growing.
According to Realtor.com’s Rent vs. Buy report, buying a home was more affordable than renting in only 17% of US counties in the fourth quarter of 2018, falling from 25% in 2017. What’s more, the monthly mortgage payment for the US median home was $1,578 in the fourth quarter of 2018, compared to the average monthly rent of $1,267.
“At the end of the fourth quarter of 2018, the monthly cost to buy the national median priced home was $1,578 or 31% of the national median income,” Realtor.com said in its report. “This is slightly more than the budgeting rule of thumb of spending no more than 30% of gross income on housing costs. The monthly cost to buy is up 13% from the same time last year when it was $1,398 and 29% of income. Meanwhile, the cost to rent increased only 4% from $1,216 to $1,267, which represents a negligible change in the share of income required of 25 percent.
“Pockets of affordability persist, but they are getting harder to find,” the report said. “Many parts of US have seen relative home-buying affordability erode away, thanks to rising home prices and interest rates, and slower rising rents. Still, while the short-term math may be challenging, in the long term, rising rents tend to eventually outpace the cost of principal and interest on a fixed rate loan, which can make a home purchase the better long-term decision. Rising home prices, which benefit owners, can tip the scales further in favor of buying and help explain why many renters want to own a home even if it is increasingly challenging to get into the housing market.”