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Cities Where Rent Prices Exceed Home Loan Payments

The median monthly price to rent a home is $1,607—that's a 9.8% annual growth, making renting some 15.5% more expensive than the monthly mortgage payments on a starter home in about half of the 50 largest cities in America, according to the Monthly Rental Report from Realtor.com. Nationwide, compared to 2019, rent prices for two-bedroom units shot up by double digits and studio rents reached a two-year high. Experts say the unknown direction of the remote-work trend could be contributing to the rent elevation in particular areas.

"Rents hit new highs in 40 of the 50 largest U.S. metros this July and grew at the fastest yearly rate we've seen in the last 18 months," said Realtor.com Chief Economist Danielle Hale. "Sky-high rents and historically low interest rates have made the  monthly cost to buy a starter home lower than renting one in nearly half the markets across the U.S. While this is good news for first-time buyers in these metros, there are plenty of other factors to consider when deciding whether to become a homeowner, including making sure it's the right time for you and your family. But if the monthly costs have been holding you back, data suggests it's worth exploring in many markets, and although it's still hard to find entry-level homes, we are seeing more smaller homes coming on the market."

Many of July's highest rent gains were seen in secondary markets where rental demand has exploded during COVID, driven in part by remote work enabling employees to escape crowded, expensive big cities—at least temporarily, Hale explains, adding that, with the future of remote work uncertain for many, first-time homebuyers saw less of a frenzy than renters in a number of July's highest-priced rental markets.

Of course, the rent-versus-buy situation varies significantly by metropolitan area—top markets where first-time homebuyers saw lower monthly payments than renters included Birmingham, Alabama; St. Louis, Missouri; and Pittsburgh, where renting averaged between $300-$400 more than mortgage payments for a starter home.

Cities known for tech startups or expansions, such as Austin, San Jose, California; San Francisco; Seattle; Boston; and New York City, however, saw starter home mortgage payments outpacing monthly rents—in Austin, by almost 80%.

"Emerging tech hubs like Austin have seen a surge in housing demand in recent years as more Silicon Valley companies have opened or expanded offices in these areas. Relocating employees, including many millennials, can see their housing dollars go much further, with rental costs roughly half as high as in San Francisco and San Jose and starter home costs more than a third lower. With growth expected to continue in Austin, there's a premium on real estate, but Californiatransplants may find that relative affordability creates first-time homebuying opportunities," Hale said.

Realtor.com provided a list of the top-10 buying markets and the top-10 for renting. The full report is available at Realtor.com.

Realtor.com July 2021 Rental Data - Top 10 Markets that Favor Buying Over Renting

Rank

Metro

% Cost
Difference
(Buy-Rent)

$ Cost
Difference
(Buy-Rent)

Median
Rent

Monthly
Buy
Cost

Rent
YoY

Buy
Cost
YoY

1

Birmingham-Hoover, Ala.

-33.1%

-$361

$1,089

$728

12.3%

28.2%

2

St. Louis, Mo.-Ill.

-29.4%

-$340

$1,155

$815

7.4%

13.7%

3

Pittsburgh, Pa.

-27.7%

-$381

$1,376

$995

8.3%

18.9%

4

Orlando-Kissimmee-Sanford, Fla.

-25.9%

-$403

$1,557

$1,154

16.2%

4.5%

5

Cleveland-Elyria, Ohio

-25.7%

-$280

$1,089

$809

6.8%

2.4%

6

Tampa-St. Petersburg-Clearwater, Fla.

-22.9%

-$389

$1,698

$1,309

27.2%

15.1%

7

Baltimore-Columbia-Towson, Md.

-20.5%

-$337

$1,647

$1,310

6.8%

7.8%

8

Indianapolis-Carmel-Anderson, Ind.

-20.4%

-$235

$1,150

$915

13.5%

4.9%

9

Virginia Beach-Norfolk-Newport News, Va.-N.C.

-19.2%

-$256

$1,330

$1,074

11.9%

3.1%

10

Riverside-San Bernardino-Ontario, Calif.

-18.5%

-$413

$2,230

$1,817

29.7%

17.7%

Realtor.com July 2021 Rental Data - Top 10 Markets that Favor Renting Over Buying

Rank

Metro

% Cost
Difference
(Buy-Rent)

$ Cost
Difference
(Buy-Rent)

Median
Rent

Monthly
Buy
Cost

Rent
YoY

Buy
Cost

YoY

1

Austin-Round Rock, Texas

79.2%

$1,228

$1,550

$2,778

14.8%

17.2%

2

San Jose-Sunnyvale-Santa Clara, Calif.

47.5%

$1,396

$2,936

$4,332

1.4%

4.8%

3

San Francisco-Oakland-Hayward, Calif.

44.4%

$1,272

$2,865

$4,137

-2.9%

-5.7%

4

Seattle-Tacoma-Bellevue, Wash.

44.2%

$872

$1,975

$2,847

5.6%

3.1%

5

Boston-Cambridge-Newton, Mass.-N.H.

40.9%

$1,001

$2,450

$3,451

-3.7%

6.1%

6

Los Angeles-Long Beach-Anaheim, Calif.

39.4%

$1,081

$2,742

$3,823

6.7%

9.5%

7

New York-Newark-Jersey City, N.Y.-N.J.-Pa.

32.0%

$773

$2,418

$3,191

-6.1%

5.6%

8

Dallas-Fort Worth-Arlington, Texas

26.9%

$382

$1,420

$1,802

13.6%

-0.6%

9

Rochester, N.Y.

26.5%

$321

$1,210

$1,531

9.5%

-8.0%

10

Portland-Vancouver-Hillsboro, Ore.-Wash.

26.4%

$443

$1,675

$2,118

11.7%

14.1%

About Author: Christina Hughes Babb

Christina Hughes Babb is a reporter for DS News and MReport. A graduate of Southern Methodist University, she has been a reporter, editor, and publisher in the Dallas area for more than 15 years. During her 10 years at Advocate Media/Dallas Magazine, she published thousands of articles covering local politics, real estate, development, crime, the arts, entertainment, and human interest, among other topics. She has won two national Mayborn School of Journalism Ten Spurs awards for nonfiction, and has penned pieces for Texas Monthly, Salon.com, Dallas Observer, Edible, and the Dallas Morning news, among others. Contact Christina at christina.hughesbabb@thefivestar.com.
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