Rents have stabilized but home prices are still rising
of ConsumerAffairsWhether you buy or rent, housingwill take a big bite of your monthly budget. But in most major metros, new research shows its a little cheaper to rent.
According to an analysis by Realtor.com, renting a median-priced unit continues to be more economical for median-wage earners than purchasing a median-priced home in nearly all major U.S. metros. The exceptions to this trend are Detroit and Pittsburgh, where buying remains the more affordable option.
Over the last 12 months, there has been a consistent decline in rental prices, coupled with persistently high mortgage rates, contributing to a market that favors renters. This shift is evident as the number of markets where buying was less expensive than renting has decreased from six to just two.
Danielle Hale, chief economist at Realtor.com, said her team expects an increase in renter households and declines in the homeownership rate in 2025.
The exceptions of Detroit and Pittsburgh
Detroit and Pittsburgh stand out as the only major metros where buying is more affordable than renting. These cities have the lowest median listing prices among the top 50 metros, with Pittsburgh at $229,700 and Detroit at $239,950.
The affordability in these Rust Belt cities is attributed to their relatively low home prices, coupled with the increasing share of income required for rent, making homeownership a more economical choice.
Despite the decline in rental prices, renters are still experiencing the effects of the rapid rent growth the occurred in 2021 and 2022. Although the January 2025 rent figures are lower than those of the previous two years, they remain $257 higher than in January 2020, indicating that renting has not yet returned to pre-pandemic affordability levels.
Renting vs. buying
The report also examines the dynamics between wage growth, mortgage rates, median rent, and listing prices to identify which metros favor renting or buying. New York, San Jose, and Detroit are the only metros where the share of income required for both renting and buying is increasing, making them less favorable for both renters and buyers.
Conversely, Kansas City, Kan., is becoming more buyer-friendly, with a higher share of income spent on rents and a lower share on buying. Additionally, 18 metros have shifted towards being rent-favoring, where a greater portion of the median earner's income is needed to purchase a home compared to a year ago.
Posted: 2025-02-19 12:01:41
