While buying your first home may be the classic American dream, those who stick to renting instead save an extra $1,000 per month compared with homebuyers.
A new report by Realtor.com® comparing the monthly costs of renting versus buying a starter home in July found that renters saved an average of $1,067 per month (or 61.3%) more than homebuyers. (For this analysis, a “starter home” is a unit with zero to two bedrooms.)
“With such cost comparisons, we are able to identify whether a market favors renting or buying,” notes Realtor.com economist Jiayi Xu in her analysis. “This is particularly important given today’s landscape, marked by elevated mortgage rates and still-high home prices, posing substantial challenges for would-be homeowners.”
The cost of renting vs. buying
Rents in America have declined year over year for the past 12 months in a row. The median asking rent in the 50 largest metros for July was $1,741. That’s $12 less than what renters paid in July 2023, and $13 lower than the market’s peak in August 2022.
On average, renting a studio cost $1,460—down $14 annually. A one-bedroom rented for $1,615 (down $23), and a two-bedroom rented for $1,933 (down $12).
In July, the median price of a home was $439,950. This means that the average cost to buy a starter home comes in at $2,808 per month—factoring in monthly mortgage payments, HOA fees, taxes, and homeowners insurance averaged at metro levels.
Top 10 metros where renters save the most
In the top 10 metros where the affordability scales favor renting, the average monthly payment for a starter home was an astonishing $1,944 higher than the average rent.
“These top rent-favoring metros are mostly markets with a higher concentration of tech workers and high earners, where both the average rent cost and buy cost are higher than the national average,” Xu explains.
Here’s a look at the top 10 markets where renting a starter home is cheaper than buying—by a lot.
Austin, TX
Average monthly cost of buying: $3,588
Average monthly cost of renting: $1,468
Monthly savings for renters: $2,120 (144.4%)
(Realtor.com)
Seattle, WA
Average monthly cost of buying: $4,286
Average monthly cost of renting: $2,064
Monthly savings for renters: $2,222 (107.7%)
Los Angeles, CA
Average monthly cost of buying: $5,581
Average monthly cost of renting: $2,797
Monthly savings for renters: $2,784 (99.5%)
(Realtor.com)
Nashville, TN
Average monthly cost of buying: $2,899
Average monthly cost of renting: $1,500
Monthly savings for renters: $1,399 (93.3%)
Phoenix, AZ
Average monthly cost of buying: $2,920
Average monthly cost of renting: $1,524
Monthly savings for renters: $1,396 (91.6%)
(Realtor.com)
Columbus, OH
Average monthly cost of buying: $2,284
Average monthly cost of renting: $1,194
Monthly savings for renters: $1,090 (91.3%)
Dallas, TX
Average monthly cost of buying: $2,788
Average monthly cost of renting: $1,481
Monthly savings for renters: $1,307 (88.3%)
(Realtor.com)
San Francisco, CA
Average monthly cost of buying: $5,212
Average monthly cost of renting: $2,770
Monthly savings for renters: $2,442 (88.2%)
New York, NY
Average monthly cost of buying: $5,229
Average monthly cost of renting: $2,887
Monthly savings for renters: $2,342 (81.1%)
(Realtor.com)
Boston, MA
Average monthly cost of buying per month: $5,309
Average monthly cost of renting per month: $2,973
Monthly savings for renters: $2,336 (78.6%)
Where savings for renters shot up the most
Meanwhile, the savings from renting expanded the most in Memphis, TN, and Birmingham, AL—two metros that flipped from favoring buyers to favoring renters during the past 12 months.
In July 2024, the cost to buy a starter home in Memphis was $210 higher per month than renting one. However, in July 2023, the cost to buy was $36 less a month than renting.
The same goes for Birmingham: In July, the cost of buying a starter home there was $105 higher a month than renting, whereas buying a starter home in July 2023 cost $104 less per month than renting one.
(Realtor.com)
Other cities where the rent advantage increased the most monthly in July include New York City, by $173; Los Angeles, by $156; and Richmond, VA, by $130.
Where the rent advantage shrank the most
While it’s still cheaper to rent in these cities, that affordability gap is narrowing in many of these cities. In fact, over the past year, 23 of the 50 largest markets saw a diminishing advantage to renting.
The place where the affordability advantage of renting shrank the most was San Francisco.
Renting a home there could save $2,442 more than buying one in July 2024, but the savings from renting was $3,005 in July 2023. So the rent advantage shrunk by $563 year over year.
(Realtor.com)
Other cities where the rent advantage shrank the most monthly in July include San Jose, CA, by $468; Denver, by $314; Washington, DC, by $282; and Miami, by $273.
Should you rent or buy a starter home?
When trying to decide whether to rent or buy, it’s important to consider how long you plan to stay put and factor in longer-term benefits such as the equity built over time by buying.
Tools like the Realtor.com Rent vs. Buy calculator can help households think these things through.
“Understanding the evolving financial advantages in rent-favoring and buy-favoring markets provides valuable insights into the timing and trade-offs involved in making informed choices between buying and renting,” Xu says.
