The Day – July® Rental Report: Buying a Starter Home is More Affordable Than Renting in Almost Half of America’s Largest Subways


As rents continue to hit new highs and mortgage rates remain low, buying a first home now costs less per month than renting a similar-sized unit in 24 of the 50 largest metros Americans, according to the® monthly rental report published in August. 26, 2021. The main markets where it is more affordable to buy a first-time home compared to renting are: Birmingham, Ala. (33.1% less), St. Louis, Mo. (29.4% less), Pittsburgh (27.7% less), Orlando (25.9% less) and Cleveland (25.7% less).

Nationally, rents continued to rise at an unusually fast pace in July, up 9.8% from a year ago and 12.2% since 2019. All unit sizes tracked by® posted rent increases to new highs:%), one-bedroom $ 1,495 (+ 9.5%) and studio apartments $ 1,315 (+ 5.6%) .

“Rents hit new highs in 40 of America’s 50 largest subways in July and increased at a near double-digit rate – the fastest annual rate we’ve seen in the past 18 months,” said Danielle Hale, Chief Economist of®. “Exorbitant rents and historically low interest rates have made the monthly cost of buying a first home lower than renting a home in nearly half of the US markets. other factors to consider when deciding to own a home, including making sure it’s the right time for you and your family. to find entry-level homes, we are seeing more and more smaller homes coming onto the market. “

Hale added that many of July’s highest rent gains were seen in secondary markets where rental demand skyrocketed during COVID, in part thanks to remote working allowing employees to escape large crowded cities and expensive – at least temporarily. With the future of remote working uncertain for many Americans, first-time homebuyers experienced less frenzy than renters in a number of the more expensive rental markets in July. This has kept monthly first-home costs on average 15.5% ($ 216) lower than rents in nearly half of America’s 50 largest subways.

Buying a first home is relatively more affordable in hot rental markets

In the top 10 metropolises that favored first-time home buying over renting in July, monthly payments for first homes were on average 24.3% lower than rents, in part because of rental prices. enrollment medians lower ($ 192,000) than the national average ($ 297,000). The types of starter homes for sale also play a key role in monthly payments, with an active inventory in these user-friendly subways comprising nearly twice the share of single-family starter homes (56.1%) than in condominium markets. that promote rental.

In July, the top 10 markets that favored buying over renting were: Birmingham, Ala. (33.1% less), St. Louis, Mo. (29.4% less), Pittsburgh (27.7% less), Orlando (25.9% less), Cleveland (25.7% less), Tampa (22.9% less), Baltimore (20.5% less), Indianapolis (20.4% less), Virginia Beach (19.2% less) and Riverside, California (18 , 5% less).

Many of these subways also posted significant rent increases from a year ago in July, led by Riverside (+ 29.7%), where the median rental price of $ 2,230 was 18.5% ($ 413) higher than a starting home’s payments, at $ 1,817 per month. Even with the price spike, rents in Riverside were relatively lower than in nearby Los Angeles ($ 2,742), making the subway an attractive option for tenants in large cities looking to save money during COVID. Compared to Los Angeles, first-time homebuyers in Riverside saw asking prices 51.5% lower and nearly three times the share of single-family startups, at 75.1% of entry-level inventory. range in July.

Renting trumps buying in big tech cities whose rents have yet to recover from COVID

Typically among the country’s more expensive housing markets, major tech hubs have largely favored renting over buying a starter home in July, in part due to higher condominium fees. Among 0- to 2-bedroom homes in these top 10 cities, more than seven in ten (71%) were condos, on average, compared to 58% nationally, while the median HOA fee of $ 334 among homes that had these fees were 27% higher. than the American median ($ 263).

Seven of the top 10 markets where monthly starting home costs were higher than rents are high tech areas, including: Austin, at 79.2% higher; San José, at 47.5% more; San Francisco, 44.4% higher; Seattle, with an increase of 44.2%; Boston, at 40.9% higher; Los Angeles at 39.4% higher; and New York, at 32.0% more.

While rental prices have surpassed pre-COVID levels in the majority of U.S. markets, rents in many of the biggest tech cities have yet to catch up to all-time highs. Among the 50 largest U.S. markets, the only four where rents fell from last year in July were all major tech hubs: New York (-6.1%), Boston (-3.7%) , San Francisco (-2.9%) and Chicago (- 1.4%

Topping the list of subways that favor high-margin rentals, with monthly costs $ 1,228 higher than rents, Austin is currently one of the most competitive housing markets in the country. While costs like median HOA fees are relatively lower in Austin compared to other big tech cities, at $ 104 versus $ 1,222 in New York City, first-time homebuyers are scrambling for limited affordable options, with a stock of houses with 0 to 2 bedrooms down 59% over the year. -year and prices up 17.5% to reach a median of $ 431,000 in July.

“Emerging tech hubs like Austin have seen an increase in demand for housing in recent years, as more Silicon Valley companies have opened or expanded offices in these areas. half as much as in San Francisco and San Jose, and starting home prices are more than a third lower. With growth expected to continue in Austin, there is a premium on real estate, but California court offices may find that relative affordability creates first-time home buying opportunities, “Hale said.



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