Challenges remain but things are improving a realtor.com analysis reveals
The affordability of homebuying compared to renting in America’s major metros has seen some improvement from lower mortgage rates, rising rents, and easing home prices.
While buying a home is still the more expensive option, the gap between the two options has narrowed according to realtor.com®'s quarterly Rent vs. Buy report.
The analysis of 593 counties in the fourth quarter of 2019 reveals that it was cheaper to buy than rent in just 16% of the counties with populations of 100,000 or more, although this was up from 12% a year earlier.
It is still cheaper to rent than buy in 84% of the nation's largest counties, including New York City, San Francisco and Los Angeles.
More than a quarter of counties (26%) switched from being more affordable to rent to favor buying year-over-year, while some of the most expensive housing markets saw the largest reduction in the gap – such as Kings (-24%) and New York (-20%) counties in NY., and Santa Cruz County, CA (-18%).
"The move toward a more balanced equation is good news for home sellers during this spring home buying season as more people, especially the large cohort of millennials who turn 30 this year, begin to weigh the cost of buying versus renting," said realtor.com® Senior Economist George Ratiu. "Due to a combination of factors, we saw the monthly cost to buy a home fall 1% year-over-year, while rents increased 4% during the same time frame."
Cost of buying vs renting
The monthly cost to buy the national median-priced home was approximately $1,600 (30% of the national median household income) in the fourth quarter of 2019, while the cost to rent increased to $1,319, (25% of the median household income).
The median listing prices in the counties where buying a home was more affordable were on average 53% lower than the national median listing price of $300,000 while median rents, while still less expensive, were only 11% cheaper on average.
The median listing prices in the counties where renting is more affordable, were on average 260% higher than the national median of $300,000., while median rents, while also more expensive, were only 79% more expensive on average.