Once upon a time, it was January 2024, and there were six major metro areas in the U.S. where it was cheaper to buy the median-priced home than it was to rent.
As of last month, only two of those six remain — meaning mortgage originators may be finding it more of an uphill battle to convince renters to make the transition to home ownership. “Over the past year, the market as a whole has moved in a more renter-friendly direction,” stated Realtor.com in its January Rent Report released Tuesday.
The report examines the relationship between wage growth, mortgage rates, median rent, and median listing price in determining which areas favor renting, and which favor a home purchase.
Nationally, the overall median rental unit costs just over $1,700/month, down 0.2% from January 2024. Renting the median-priced two-bedroom unit — to compare against a typical first-time buyer's desires — is $1,887, also down 0.2% from a year ago.
The Shifting Rent-Or-Own Dynamic
The report found renting a median-priced unit is now more affordable for median wage earners than buying the median priced for-sale home listed in all major U.S. metros except for Detroit, Mich., and Pittsburgh, Pa. As of January, those two cities had median-priced home listings of $229,700 and $239,950, respectively.
"This relative cost advantage [of renting] is one of the reasons we expect an increase in renter households and declines in the homeownership rate in 2025," noted Danielle Hale, chief economist at Realtor.com, in a release.
While the national average median rental cost was down 0.2% last month from a year earlier, according to the report, some metro areas saw year-over-year declines in median rental prices of 4% or more, including:
- Austin-Round Rock-San Macros, Texas, where the median rental cost was down 4.8% from last year to $1,467. There, the share of income spent on rent averaged 17.2%, while the share of income spent on buying a home averaged 30.3%.
- Denver-Aurora-Centennial, Colorado, where the median rental cost was $1,796, down 5.6% from January 2024. There, the share of income spent on rent averaged 20.2%, and the share of income spent on purchasing a home averaged 33.45.
- Memphis, Tennessee, where the median rental cost was $1,177, down 4.3% from January 2023. There, the share of income spent on renting averaged 21.1%, while the share of income spent on a home purchase averaged 30.8%.
- San Diego-Chula Vista-Carlsbad, California, where the median rental cost was $2,695, down 4.8% from a year ago. There, the share of income spent on renting averaged 31.4%, while the share of income spent on buying a home averaged 57.7%.
Rising Costs Of Homeownership
This comes as homeownership costs have been increasing. Not only have mortgage rates and home prices remained high, other costs such as insurance, taxes, and maintenance have been climbing, and it has contributed to a sense of buyer’s remorse for home purchasers who do take the plunge — exacerbating the stick-with-renting effect.
For example, a survey of 1,000 homeowners conducted by Real Estate Witch at the end of November 2024 showed American homeowners now spend an average of $24,529 per year, or $2,044 a month, on home repairs and maintenance costs on top of their monthly mortgage payment, a nearly 37% increase from $17,958 the prior year.
“The inflation that happened in 2021, 2022, 2023 impacted a lot of things that impact housing costs,” Daryl Fairweather, chief economist at real estate brokerage Redfin, noted recently in an interview with NMP. “So insurance costs, maintenance costs, property taxes, HOA fees — they all go up when inflation goes up."
