Housing markets where home buying is cheaper than renting

Paul Centopani
Paul Centopani
The Mortgage Reports Editor
July 20, 2022 - 3 min read

Buying versus renting in 2022

Between spiking mortgage rates and the sprinting pace of home price growth, home buyer affordability took a big hit in 2022. These conditions can push potential buyers to the sidelines with some even waiting until next year.

But buyers should keep in mind that renting isn’t always more affordable than buying. While renting is still cheaper in some major metro areas, there are many places where buying offers a better opportunity for those looking to purchase starter homes.

Among the 50 largest U.S. housing markets, the most affordable for first-time home buyers were scattered across the Midwest and South.

Where buying a house is cheaper than renting

Affordability can be a massive barrier to buying your first home. Mortgage rates shooting up from the past two years of historic lows magnified that issue.

However, it’s still more affordable to buy your first house instead of renting in some of the country’s biggest markets. Spans of the Midwest and South gave buyers of starter homes the biggest financial advantage in June.

Housing markets where buying is cheaper than renting

Metro areaDifference between buying and renting (%)Difference between buying and renting per month ($)
Pittsburgh, Pa.-33.0%-$522
Birmingham, Ala.-29.5%-$377
St. Louis, Mo.-20.7%-$284
Cleveland, Ohio-13.8%-$198
Baltimore, Md.-9.0%-$164
Louisville, Ky.-5.0%-$63
Virginia Beach, Va.-3.5%-$55
Indianapolis, Ind. -2.8%-$36
Cincinnati, Ohio-0.9%-$14
Kansas City, Mo.-0.9-$12

For its report, Realtor.com gathered data from the 50 largest U.S. housing markets. It compared the rental and purchasing costs of studios, 1-bedroom and 2-bedroom units, assuming a 7% down payment, a 5.52% 30-year fixed mortgage rate (Freddie Mac’s average for June), HOA fees, taxes and homeowner’s insurance.

What to do if your area didn’t make the list

If none of the cheaper housing markets listed below make it to your search radius, taking more time to save up will help you lower your monthly mortgage payments, according to Realtor.com Senior Economic Research Analyst Joel Berner. On top of that, he implores first-time home buyers to be patient.

“The nationwide inventory of homes for sale is growing, listing price growth is leveling off, and price reductions are increasing. The market is shifting back into equilibrium after the pandemic-induced demand shock that drove dramatic price increases and record low inventory. With mortgage rates at their highest point since the financial crisis of 2008, having a sizable down payment will be essential,” Berner said.

Where it’s cheaper to rent

Realtor.com data revealed 38 of the 50 largest U.S. metro areas had lower monthly rental costs than first-time homeownership in June.

“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.”

-Danielle Hale, chief economist at Realtor.com

At the national level, the gap between home buying costs and rent widened in 2022. Overall, first-time home buyers paid an average of $561 more per month than the median renter ($2,437 versus $1,876) in June. That monthly discrepancy compared to $171 ($1,815 versus $1,644, respectively) in 2021.

Housing markets where renting is cheaper than buying

Metro areaDifference between buying and renting (%)Difference between buying and renting per month ($)
Austin, Texas97.8%$1,822
San Francisco, Calif.79.9%$2,535
Seattle, Wash.78.3%$1,801
New York, N.Y.70.0%$2,092
San Jose, Calif.65.4%$2,175
Portland, Ore.61.6%$1,128
Los Angeles, Calif.60.5%$1,846
Boston, Mass.57.3%$1,698
Houston, Texas53.3%$773
Phoenix, Ariz.52.2%$929

Both home values and rent prices grew at break-neck speeds over the last 18 months but the added factor of rising interest rates strained affordability further for prospective home buyers.

“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,” according to Realtor.com Chief Economist Danielle Hale.

“Many of the areas that favored renting are among the biggest tech cities, where real estate tends to come at a premium. While more markets offered relative rental affordability in June than in January, rents are still rising across the country,” she added.

What are today’s mortgage rates?

This year, historically high inflation drove mortgage rates above 5 percent. Rates could continue trending upward if the Federal Reserve takes aggressive action to offset inflation as expected.

Odds are you can lock in a lower mortgage rate if you do it sooner rather than later.

If you’re ready to buy, talk with a local mortgage lender to check your borrower eligibility, the best loan type for you, and the latest interest rates you qualify for.