The National Association of Realtors (NAR) quarterly “Rent vs. Buy” report says that after years of skyrocketing home prices, the combination of rising rents, lower mortgage rates and moderating home prices is making purchasing a home more attractive in many of the nation’s largest metros,
The report, which analyzes the cost of buying versus renting in 593 counties across the U.S. in the fourth quarter of 2019, found that it was cheaper to buy than rent in 16% of the counties with populations of 100,000 or more, up from 12%a year earlier.
Despite homeownership becoming more affordable, 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.
“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,” says realtor.com Senior Economist George Ratiu.
“Due to a combination of factors, we saw the monthly cost to buy a home fall 1 percent year-over-year, while rents increased 4 percent during the same time frame,” he adds.
The monthly cost to buy the national median-priced home was approximately $1,600, or 30% of the national median household income, in the fourth quarter of 2019, in line with the budgeting rule of spending no more than 30% of gross income on housing costs.
The cost to rent increased to $1,319, representing 25% of the median household income in the fourth quarter.
Over the past year, 26 of the 593 counties analyzed shifted from being more affordable to rent to being more affordable to buy, including in the Cleveland; Bronx County, N.Y.; Indianapolis; and Columbia, S.C, areas.
Although it is still cheaper to rent than buy, some of the nation’s most expensive housing markets, including Kings and New York counties in N.Y., along with Santa Cruz County, Calif., saw the gap between renting and buying decrease the most: by 24%, 20% and 18%, respectively.
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. 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. Median rents, while also more expensive, were only 79% more expensive on average.